Iraqi gas has hurdles to clear

11 September 2009

Baghdad must overcome two obstacles if it is to return production to the levels of the 1980s

Iraq has the tenth largest gas resources in the world, with 112 trillion cubic feet of proven reserves. However, the development of these has trailed behind the exploitation of its crude oil reserves. Gas production is still below half the level it was in the late 1980s under Saddam Hussein.

The central government has taken one positive step to improve gas production by resurrecting the Iraq National Oil Company, which was disbanded by Saddam Hussein in 1987, to oversee the development of three key gas fields, Akkas, Mansuriya and Siba, as well as oil fields.

Baghdad must now overcome two further obstacles if it is to return production to the levels of the 1980s.

The first is to define what role international energy majors will play in the development of the gas sector, in light of a resurgence in resource nationalism.

The second is to reach an accommodation with the Kurdish-dominated north of Iraq. The Kurdish Regional Government (KRG) says the federal constitution gives it the right to negotiate its own exploration contracts. But Baghdad has threatened to blacklist energy majors if they work with the KRG on oil and gas contracts in northern Iraq.

Despite these problems, Baghdad is making progress in halting the flaring of gas generated as a byproduct of crude oil production.

At present, about 700 million cubic feet of gas is lost to flaring every day. The South Gas Utilisation project, which involves the gathering, treatment and processing of raw gas produced within Basra province for use in both the domestic and export markets, will help end the practice of flaring.

It will also help Baghdad meet its stated goal of increasing natural gas production to 2.5 trillion cubic feet a year by 2017.

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