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< Back to Iraqi Dinar in the News December 7th, 2009

Firms overstate Iraq oil potential - govt adviser

International oil company production goals too high

* Iraq output could reach 6 million bpd in 6-7 years

* Output surge unlikely to worry OPEC

 

By Joe Brock

LONDON, Dec 7 (Reuters) - Some international oil companies have overstated how high they can take Iraq's crude oil production, a senior government adviser said on Monday, ahead of a second round of oilfield development tenders this week.

Thamir Ghadhban, adviser to Iraq's prime minister and a former oil minister, told an industry conference that he believed 6 million barrels per day (bpd) was a realistic target for Iraq's oil output within the next 6 to 7 years.

This is well below the estimates of 10 or even 12 million bpd that have been mentioned as a result of plateau production targets proposed by some foreign oil companies as they bid for Iraqi oilfield contracts.

Iraq's Oil Ministry plans to auction off contracts for 10 untapped oilfields on Dec. 11-12, the latest chapter in a scheme to catapult it into the big league of oil producers. Contracts awarded since a first round of tenders in June alone have the potential to almost triple output to 7 million bpd.

"With all due respect to IOCs (international oil companies) and their technical expertise, I think some of the plateau figures that were bid on in the first round were exaggerated and most likely unsustainable," said Thamir Ghadhban.

"According to our plan an oil production rate of 4.1 million bpd will be achieved by 2012 and this will be ramped up to 6.0 million bpd by 2017," Ghadhban added.

Last month, oil major BP (BP.L) and China's CNPC signed a 20-year development contract for Rumaila, one of the world's biggest oilfields, sparking optimism over large increases in Iraq's crude ouput.

BP and its partner committed to lifting Rumaila's output to 2.85 million bpd from 1.05 million bpd currently.

 

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Agreements have also been inked with an Eni-led (ENI.MI) group for the Zubair field and an Exxon Mobil-led (XOM.N) consortium for West Qurna.

These three projects alone have the potential to lift Iraq's output by 4.5 million bpd from 2.5 million bpd currently, according to the projections provided by the oil companies.

Even the lower estimate for production increases mentioned by Ghadhban could put pressure on oil prices given the slow pace of demand recovery following the global economic crisis and as the world works towards improved energy efficiency.

Some analysts suggest Iraq could be damaging its own economy by allowing output to increase too rapidly.

"What Iraq can gain from producing more oil it will lose in a fall in price," said Fadhil Chalabi, executive director at Centre for Global Energy Studies in London, in reaction to Ghadhban's speech on Monday.

Iraq is a member of the Organization of the Petroleum Exporting Countries (OPEC) but does not have an output target.

OPEC has held its formal output targets steady all year following a decision announced last December to cut supplies by a record 4.2 million bpd from September 2008 levels in an attempt to support falling oil prices.

Ghadhban said on Monday he did not expect fellow OPEC members to be concerned by production increase plans, despite a possible impact on oil prices.

"I am not of the opinion that we are approaching any problems with OPEC."

OPEC meets on Dec. 22 in Angola to decide on future output policy.

(Additional reporting by Simon Webb in Dubai; editing by Michael Christie in Baghdad and William Hardy)