Iraq’s hopes to raise its crude oil production capacity to 12 million barrels a day (b/d) by 2017, five times higher than current production. Hitting the half-way mark in the time set by the government itself will be a huge achievement for Iraq.
There is much to done. Oil fields must be cleared of land mines and unexploded ordinance. Pipelines and export infrastructure must also be built, and all this against the backdrop of Iraq’s ongoing political stalemate.
While Baghdad is busy preparing to get down to work, the international oil firms who have signed on to boost production have something new to think about. On 4 October, the Oil Ministry announced Iraq’s crude reserves are now estimated at more than 143 billion barrels, 25 per cent higher than earlier estimates. It is quite an estimate, given that no new exploration has taken place. Many expect to see regular upward revisions to the figure as exploration gets under way and Iraq seeks to attract new investors.
Hitting the half-way mark [for oil production] itself will be a huge achievement for Iraq
The new figures will be sent to Opec, which will calculate Iraq’s oil production quota. With current production at only 2.4 million b/d, the group sees no need to impose a quota yet. Rising production levels will eventually become an issue for the oil cartel, however.
Iraq’s new capacity will not be welcomed by other members, who will be unwilling to put their growth plans on hold, while their own market share is cut. Iran, in particular, will not be keen to see its old foe race past it.
The idea that Iraq can be a stabilising force in the oil markets is not new. Having lifted its own production to more than 12 million b/d in June 2009, the country has left much of it idle to prevent the markets becoming oversupplied. Iraq, however, lacks the financial clout or upstream flexibility to back this status.
The Oil Ministry will press ahead with its plans. But it must be prepared for falling short of its targets.