Iraq has boosted oil production to its highest level in 20 years — thanks to the foreign companies — to some 3 million bpd and hopes to double that by 2015. But there are growing doubts it will be able to.
There are good reasons to doubt these projections,” observed analyst Ben Val Heuvelen writing in Foreign Policy.
“For one thing the current political crisis has underscored Iraq’s failure to build the kind of institutions — a credible judiciary, non-politicized security forces — that support a stable, functioning, democratic state.
“Even if Iraq weren’t plagued by daily bombings and political dysfunction, it would be hard pressed to achieve what would be the most rapid oil expansion in world history.”
Iraqi Prime Minister Nouri al-Maliki’s Shiite-dominated government wants to boost oil production higher than Saudi Arabian levels to 10 million-12 million barrels per day within the next seven years. That depends on investment of some $150 billion by major international oil companies over the next decade under 20-year production contracts first awarded in 2009.
2. Output in Kurdistan (Iraq’s mountainous region bordering Turkey, Syria and Iran) is an on-off trickle for now in global terms but, given the right investment and an export route, it could reach 1 million barrels per day by 2014, and 2 million five years later, according to Ashti Hawrami, the KRG natural resources minister.
The sticking point for KRG development is that Baghdad has jurisdiction over all exports, and contests the validity of contracts signed with the Kurdish government in Arbil.
In 2002 Turkish company Genel Enerji blazed an exploration trail to the region. Norwegian company DNO (DNO.OL) and others followed after the U.S.-led invasion of Iraq in 2003.
Now more than 40 foreign companies are drilling in oil territory so rich that in some places the crude seeps out of the hillside and collects in the valley below.
Proven reserves in Iraqi Kurdistan of 45 billion barrels amount to more than a third of the national total of 143 billion recorded in BP’s annual statistical review, where Iraq accounts for 8.7 percent of all the world’s known oil.
In 2007 Hawrami came within a whisker of making Royal Dutch Shell (RDSa.L) his first really big signing, but the board of the world industry number two ruled it too risky, an industry source said. Shell later became, and remains, the biggest oil investor in southern Iraq.
Because of the politics and the payback issue, ventures into KRG territory remained the preserve of smaller explorers with an appetite for political risk and nothing to lose in Baghdad.
In November last year, four years after Shell walked away, came the game changer.
Exxon Mobil (XOM.N), the world’s biggest private oil company, signed a deal for six exploration blocks.
Last month, the U.S. number-two player Chevron (CVX.N) moved in too, buying 80 percent of two blocks, Sarta and Rovi, from India’s Reliance (RELI.NS).
And last week, Total (TOTF.PA) of France piled in, buying 35 percent of the Harir and Safen blocks from Marathon Oil (MRO.N), along with Gazprom (GAZP.MM) of Russia, which farmed in to the Garmian block operated by Canadian company Western Zagros (WZR.V).
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