BP’s latest Statistical Review of World Energy published on 13 June highlights Iraq’s re-emergence as one of the world’s leading oil producing nations, both in terms of reserves and production.

Total global crude oil reserves are now estimated at 1,653 billion barrels. The 2011 reserves figure is up 2 per cent from the 1,622 billion barrels estimated at the end of 2010. A significant portion of the increase comes from a 24.4 per cent upgrade to Iraq’s oil reserves to 143 billion barrels from 115 billion barrels. No other country witnessed such a dramatic spike in reserves.

Iraq’s Oil Ministry announced that it had raised its estimate of the country’s proven oil reserves by the same amount in October 2010. The older statistics had not been revised since 2001 and were based on 2D seismic data from the 1980s. Although the Oil Ministry’s estimate was not included in the 2011 statistical review, it has now been accepted by BP.

Reserve reassessment

The most significant revision was for the West Qurna fields in the south of Iraq, which are now estimated to contain 43.3 billion barrels, rather than 21.4 billion as previously thought. The estimate for the Zubair field has also been revised, from 4 billion barrels to 7.8 billion barrels.

With international oil companies working on reappraisals of Iraq’s producing fields, and huge areas of the country remaining relatively unexplored, particularly in the western deserts, this figure is likely to be revised further upwards over the next few years.

With 865.7 billion barrels, the Middle East and North Africa accounts for 52.4 per cent of total global reserves. This ratio has remained largely stable over the past three decades, reaching a peak of 68 per cent in 1989 and averaging 61.5 per cent over 32 years.

“According to Iraq’s 2011-14 development plan, the Oil Ministry hopes to reach an average of 3.3 million b/d in 2012”

Saudi Arabia continues to be the largest reserve holder in the region with 265.4 billion barrels, or 16.1 per cent of the global total. The kingdom is followed by Iran with 151.2 billion barrels, Iraq with 143.1 billion and Kuwait with 101.5 billion. Libya holds the largest reserves in Africa, but this only amounts to 47.1 billion barrels. The 12 members of the oil producers’ group Opec account for 1,196.3 billion barrels of reserves, approximately 72.4 per cent.

When it comes to production, BP’s figures reflect the severe impact of the Arab uprisings on oil output and underscore the importance of maintaining spare capacity. Total global oil production was 83.6 million barrels a day (b/d) in 2011, up 1.3 per cent on 2010 levels. Production in the Middle East and North Africa amounted to 31.2 million b/d, or 37 per cent of the global total. Opec contributed 42.4 per cent of this total with 35.8 million b/d, an increase of 3 per cent.

This was despite a tumultuous year for the group, which faced disruptions to supplies from Libya between March and October. The country’s output fell by 71 per cent to an average of 479,000 b/d for the year as a result of a civil war, which caused international oil companies to withdraw, along with damage to pipelines, refineries and infrastructure. The country has only just returned to near pre-war production of about 1.7 million b/d.

Syria’s output has also been hampered by civil unrest that began in March 2011, with production dropping 13.7 per cent to 332,000 b/d. President Bashar al-Assad’s brutal crackdown on anti-government protests has led to the death of thousands of civilians, and although reluctant to intervene militarily, Western powers have imposed sanctions on the purchase of Syrian crude. The EU issued new sanctions against Damascus on 1 December, which included blacklisting the state-owned General Petroleum Corporation, the Syrian holding company responsible for investments in the oil and gas sector.

Pipeline disruptions

Another country struggling with the effects of the Arab uprisings is Yemen. Repeated attacks on its pipeline infrastructure forced cut backs in production of both oil and natural gas, which are critical to the government’s revenues.

Yemeni oil production has fallen steadily over the past decade from 457,000 b/d in 2002 due to a combination of underinvestment and maturing oil fields. In 2011, output dropped by 24 per cent to 228,000 b/d. Production in mid-2011 was reduced to less than 50 per cent due to the sabotage of the Marib oil export pipeline. The 120,000 b/d pipeline runs from fields in Block 18 in the Marib province to the Red Sea port of Ras Issa, carrying sweet light crude oil, which is exported by state-owned oil company Safer. Revenues from the exports are then used to buy heavier crudes, particularly from Iran, for use as feedstock for the Aden refinery.

Meanwhile, other countries benefited from the turmoil and have been keen to cash in on the resulting higher oil prices. To make up for the shortfall in Libyan, Syrian and Yemeni crude supplies, Opec members with spare capacity boosted production.

Saudi Arabia increased production by 12.7 per cent to record highs of almost 11.2 million b/d, just 1.3 million b/d below the kingdom’s production capacity, which is estimated to be 12.5 million b/d. Kuwait followed suit raising its production to 2.87 million b/d, from 2.52 million b/d in 2010. UAE production also rose 14.2 per cent to 3.3 million b/d.

Losses offset

BP notes that global oil production in 2011 increased by 1.1 million b/d, or 1.3 per cent, with the net growth from Opec members more than offsetting the 1.2 million b/d loss of Libyan supply. Output reached record levels in Saudi Arabia, the UAE and Qatar.

Production in Iraq is also on the rise. The country produced almost 2.8 million b/d last year, compared to 2.48 million b/d in 2010. This figure is expected to climb rapidly in the coming years as international oil companies move ahead with their developments. According to its 2011-14 development plan, the Oil Ministry hopes to reach an average of 3.3 million b/d in 2012, 4.5 million b/d in 2013 and 6.5 million b/d in 2014.

Having signed a dozen oil field development agreements with international oil companies, Iraq is aiming to produce more than 12 million b/d by the end of the decade.

Many have questioned both Iraq’s ability to deliver on this goal and whether the production increase is indeed desirable, given the impact such a supply surge would have on oil prices and Iraq’s reserves.

The Oil Ministry is slowly coming to grips with this debate and now appears to be willing to consider lower production targets of about 8-9 million b/d. But any adjustments will have to come after lengthy negotiations with international oil companies over new remuneration fees.

Iranian production, meanwhile, dropped by 0.6 per cent to 4.32 million b/d last year. This figure is likely to be further reduced in BP’s 2013 review, which will take into account the effect of tougher EU sanctions on Iran crude oil exports from 1 July.

Combined with supply disruptions in several other countries, this pushed prices higher, despite the increase in production among other Opec members and the release of strategic stocks from International Energy Agency member countries.

Outside the Middle East, BP’s survey also shows increases in production from the US, Canada and Russia, with rises of 3.6 per cent, 5 per cent and 1.2 per cent respectively.

Accounting for 12.8 per cent of global production, the Russian Federation stands just behind Saudi Arabia as the world’s second largest producer, with output totalling 10.3 million b/d in 2011.

New resources

The US recorded the largest non-Opec production increase in volume terms for a third consecutive year as a result of its successful development of oil shale reserves, producing a total of 7.8 million b/d in 2011.

“In my mind, it is no coincidence that the innovations driving the renaissance in US oil and gas production are taking place in one of the most open and competitive upstream segments in the world,” says Bob Dudley, BP’s chief executive in his introduction to the statistical review.

“The example of North America highlights how competition and a level playing field foster innovation, ultimately leading to the production of previously inaccessible, new, ‘unconventional’ resources.”

The re-emergence of Iraq as a world energy player and rising output in the US will be key trends influencing the global oil industry in the coming years.