The Iraqi Oil Ministry has significantly lowered its 2020 target oil production capacity as budget constraints and infrastructure delays drag on its southern oil expansions.

“Current production is about 3.8 million barrels a day (b/d) and is expected to be about 5.5-6 million b/d over the current decade,” said Falah Alamri, director-general of ministry’s Oil Marketing Company (Somo).

Alamri gave a speech at the Iraq Petroleum conference in London on 9 June in place of Iraqi Oil Minister Adil Abdulmahdi.

Iraq’s last official target for oil production was 9 million b/d based on revised service contracts signed with the international oil companies (IOCs) developing the country’s southern oil fields. The original target set in 2008 after awarding several field development contracts 12 million b/d.

The Iraqi government has had its budget squeezed by lower crude prices and the costs of the ongoing conflict with Islamic State in Iraq and Syria (Isis), make it more difficult to pay oil companies.

UK-oil major BP, which is developing the giant Rumaila field, has reportedly cut its 2015 development budget for 2015 by $1bn to $2.5bn due to Baghdad’s reduced ability to make payments.

Other IOCs including UK/Dutch Shell and Russia’s Lukoil are also thought to be renegotiating production targets and planned investment.

“We are already seeing slowdowns in terms of capital spend on these large fields,” says Tony Mills, vice-president of consulting at UK-based energy consultancy Wood Mackenzie.

“The last 10 years has seen $24bn invested in upstream development with production increased by 1.5 million b/d. This is significant progress but below expectation, and the activity is slowing,” he added.

Mills says that the government’s bureaucratic processes were holding back the oil sector.

“You need to approve the process of contract renewal, you need to improve the infrastructure… customs clearance and decision-making,” he added.  “[There needs to be] less bureaucracy, more efficient processes and the application of standard industry practice.”

Alamri said that the government has given IOCs $36bn in payments and crude oil since 2011 as part of the technical service contracts.

Iraq’s oil storage capacity is expected to increase to 20 million barrels from 14 million barrels by the end of the year. 

“There is around 7 million barrels storage under construction to be completed by 2017,” said Alamri. “In addition to that the Oil Ministry is planning to add another 9 million barrel storage capacity to overcome the export bottleneck in the south.”