Comments: Iraq's Potential
- John Donnelly (JPT Editor)
- Document ID
- Society of Petroleum Engineers
- Journal of Petroleum Technology
- Publication Date
- March 2010
- Document Type
- Journal Paper
- 16 - 16
- 2010. Society of Petroleum Engineers
- 1 in the last 30 days
- 145 since 2007
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Iraq may eventually alter the global production landscape, but the initial steps taken last year and in early 2010 to revive its oil sector have been cautious. Questions about infrastructure, security, export ability, and contract terms continue to hold back any change of a quick recovery.
Iraq contains the world’s third-largest proven reserves of conventional oil and eventually could rival Saudi Arabia as OPEC’s top producer, but the oil industry is so far skeptical of the country’s plans to boost production from the current 2.5 million BOPD to 6–7 million BOPD in 6 years. Some analysts say that number could be higher. James Burkhard, director of oil research for energy consultants IHS-CERA, believes that Iraq’s untapped oil fields could add almost 10 million BOPD within 10 years, changing the dynamics of OPEC.
That may be too much to ask a country hampered by years of war, sanctions, post-war violence, and messy politics. But even if it met half its goal, the impact would be huge. Saudi Arabia, long OPEC’s swing producer with the ability to affect oil prices by raising or curtailing production, currently produces 8 million BOPD but has a capacity of at least 12 million BOPD.
Iraq has held two international bid rounds to try to attract investor interest in reviving its E&P with mixed results, although the globe’s largest operators appear to be key to fixing and reviving the energy landscape there. In January, Iraq awarded the last of 10 international licenses to develop fields during the two rounds, just half of the 21 fields on offer. Fifteen firms won the rights to develop fields under 20-year contracts, the first outside company access to Iraq since foreign firms were banned in the 1970s. The country apparently remains one of the few regions in the world that has vast reserves that have not been well-exploited.
There are already some optimistic signs. One of the country’s largest fields, Rumaila, is scheduled to begin producing an additional 100,000 BOPD in July. BP and CNPC won the rights to that field in the first auction last June. The field is estimated to contain 15% of Iraq’s total reserves.
Among the January winners were Shell and Petronas, which won the rights to develop Majnoon, one of the largest unexploited fields; CNPC, Petronas, and Total, which won the rights to the Halfaya field; and Lukoil and Statoil, which were the high bidders on perhaps the most valued property, West Qurna-2. Other winners were Eni for the Zubair field and ExxonMobil and Shell for West Qurna-1.
Elections scheduled for this month could be critical for Iraq’s future oil development. Nonviolent elections that lead to a more stable political and business environment will go a long way to attracting the type of investment needed to develop its vast potential. Of particular need is an oil law that will protect the rights of foreign oil investors.
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