According to estimates, Iraq's oil production and capacity may peak after growing by about 25% over the next five years, falling short of 2027 projections and putting a stop to a long-standing goal to compete with Saudi Arabia's output, the top OPEC producer.
Political squabbling has prevented Iraq from making the investment necessary to increase output more quickly. Even with the efforts of the nation's new energy minister to entice investment, Baghdad may never be able to cash in on the hundreds of billions of barrels it has in the ground as the energy transformation picks up speed.
Iraq's production has plateaued at about 4.5 million barrels per day since 2016. (bpd).
Prior to that, capacity quickly increased as the government opened up the industry in 2009 and foreign oil corporations renovated the largest oilfields in the nation.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, agreed to a supply policy that included Iraq capping output, which contributed to the slowing of growth.
Asim Jihad, a spokesperson for the oil ministry, told Reuters that Iraq's newly appointed oil minister, Hayan Abdel-Ghani, intends to modernize Iraq's oil production policies to suit regional demands while abiding by the OPEC+ agreement.
According to Jihad, it is still too early for the new administration to discuss any big increases in Iraq's oil production outside of the OPEC+ accord. Iraq's output goal is 4.43 million bpd through December, as per the deal.
As a result, analysts at FGE consulting and Rystad Energy told Reuters that Iraq has moved its attention to the refining and gas sectors and reduced capital expenditure in the oil sector.
The nation has repeatedly postponed a goal to increase oil production capacity from the existing 5 million barrels per day to 7-8 million barrels per day. The previous administration declared its intention to achieve the higher levels by 2027 last year.
According to several oil industry consultancies, Iraq might never reach them.
Iman Nasseri, general director for the Middle East at FGE consultancy, predicted that capacity will reach a maximum and plateau at 6.3 million bpd by 2028 before falling. He said that Iraq was unable to increase output over that level because to factors including politics, security, and the investment climate.
"We think Iraq's current target looks hard, if not impossible to achieve," Nasseri said.
Due to midstream growth restrictions and the inability to move through with projects that are essential to increasing output, Rystad Energy predicted that production will be capped at 5.5 million bpd by 2027.
The present goals and even lower estimates are far beyond Iraq's post-war goal of increasing capacity to 12 million bpd, which was set two decades after the conflict started.
The aim was scaled back in 2012 as a result of lower output targets being agreed upon by foreign oil firms operating in Iraq for their fields due to low recovery factors, high rates of natural decline, and a lack of infrastructure investment by Iraq, according to analysts.
Also, the major oil firms had hoped Baghdad would enhance the conditions of technical service agreements (TSCs). ExxonMobil Corp. and Royal Dutch Shell Plc left because it never happened.
Experts and industry insiders claim that the issues, which include repeated changes to government, political infighting, and red bureaucracy, are found above ground as opposed to in the geology below, which has tremendous untapped capacity.
The fifth licensing round for Iraq was not approved by any of the succeeding governments in 2018. At the end of February, six deals out of the eleven oil and gas blocs on offer were finally completed, bringing about long-needed revisions to the country's operating conditions.
Crescent Petroleum of the UAE and two Chinese enterprises were the winners instead of the multinational oil corporations.
The contracts won pay royalties upfront and link revenues to oil prices, according to a source close to the Iraqi energy sector who asked to remain anonymous because they were not authorized to speak to the press.
The source speculated that Abdel-decision Ghani's to sign the agreements four months after his appointment may indicate a renewed commitment on the part of the government to make arrangements that are more enticing to foreign energy companies.
There are yet more problems.
Haggling over terms has caused a large-scale seawater treatment project that is required to increase output at the southern oilfields by water injection to be put on hold for more than ten years.
As part of a $27 billion agreement to construct four oil, gas, and renewable energy projects over a 25-year period, French oil behemoth TotalEnergies is the most recent company to take on the project.
Contractual disputes remained unresolved this month, according to TotalEnergies CEO Patrick Pouyanne.
"Iraq is not the easiest place to invest with all risk," Pouyanne said.
According to Rystad statistics and Reuters research, the water project would increase output at the five Iraqi fields by 2 mln bpd of the 2.4 mln bpd growth required to fulfill Iraq's 2027 targets.
Aditya Saraswat, vice president of Rystad's Middle East upstream studies, warned that completion before 2027 is doubtful.
This month, the oil minister of Iraq reopened seven investment prospects in the country's refining industry.
Even if Abdel-Ghani is successful in locating businesses interested in those projects, Iraq's refining capacity only permits a 500,000 bpd increase in oil output growth, which would take time, according to Saraswat.
In the meantime, data from the state-owned marketer SOMO showed that due to delays in infrastructure renovations at its Gulf ports, Iraq's southern export capacity had stagnated at about 3.2-3.3 million bpd for the past year.
(Source:www.reuters.com)
Political squabbling has prevented Iraq from making the investment necessary to increase output more quickly. Even with the efforts of the nation's new energy minister to entice investment, Baghdad may never be able to cash in on the hundreds of billions of barrels it has in the ground as the energy transformation picks up speed.
Iraq's production has plateaued at about 4.5 million barrels per day since 2016. (bpd).
Prior to that, capacity quickly increased as the government opened up the industry in 2009 and foreign oil corporations renovated the largest oilfields in the nation.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, agreed to a supply policy that included Iraq capping output, which contributed to the slowing of growth.
Asim Jihad, a spokesperson for the oil ministry, told Reuters that Iraq's newly appointed oil minister, Hayan Abdel-Ghani, intends to modernize Iraq's oil production policies to suit regional demands while abiding by the OPEC+ agreement.
According to Jihad, it is still too early for the new administration to discuss any big increases in Iraq's oil production outside of the OPEC+ accord. Iraq's output goal is 4.43 million bpd through December, as per the deal.
As a result, analysts at FGE consulting and Rystad Energy told Reuters that Iraq has moved its attention to the refining and gas sectors and reduced capital expenditure in the oil sector.
The nation has repeatedly postponed a goal to increase oil production capacity from the existing 5 million barrels per day to 7-8 million barrels per day. The previous administration declared its intention to achieve the higher levels by 2027 last year.
According to several oil industry consultancies, Iraq might never reach them.
Iman Nasseri, general director for the Middle East at FGE consultancy, predicted that capacity will reach a maximum and plateau at 6.3 million bpd by 2028 before falling. He said that Iraq was unable to increase output over that level because to factors including politics, security, and the investment climate.
"We think Iraq's current target looks hard, if not impossible to achieve," Nasseri said.
Due to midstream growth restrictions and the inability to move through with projects that are essential to increasing output, Rystad Energy predicted that production will be capped at 5.5 million bpd by 2027.
The present goals and even lower estimates are far beyond Iraq's post-war goal of increasing capacity to 12 million bpd, which was set two decades after the conflict started.
The aim was scaled back in 2012 as a result of lower output targets being agreed upon by foreign oil firms operating in Iraq for their fields due to low recovery factors, high rates of natural decline, and a lack of infrastructure investment by Iraq, according to analysts.
Also, the major oil firms had hoped Baghdad would enhance the conditions of technical service agreements (TSCs). ExxonMobil Corp. and Royal Dutch Shell Plc left because it never happened.
Experts and industry insiders claim that the issues, which include repeated changes to government, political infighting, and red bureaucracy, are found above ground as opposed to in the geology below, which has tremendous untapped capacity.
The fifth licensing round for Iraq was not approved by any of the succeeding governments in 2018. At the end of February, six deals out of the eleven oil and gas blocs on offer were finally completed, bringing about long-needed revisions to the country's operating conditions.
Crescent Petroleum of the UAE and two Chinese enterprises were the winners instead of the multinational oil corporations.
The contracts won pay royalties upfront and link revenues to oil prices, according to a source close to the Iraqi energy sector who asked to remain anonymous because they were not authorized to speak to the press.
The source speculated that Abdel-decision Ghani's to sign the agreements four months after his appointment may indicate a renewed commitment on the part of the government to make arrangements that are more enticing to foreign energy companies.
There are yet more problems.
Haggling over terms has caused a large-scale seawater treatment project that is required to increase output at the southern oilfields by water injection to be put on hold for more than ten years.
As part of a $27 billion agreement to construct four oil, gas, and renewable energy projects over a 25-year period, French oil behemoth TotalEnergies is the most recent company to take on the project.
Contractual disputes remained unresolved this month, according to TotalEnergies CEO Patrick Pouyanne.
"Iraq is not the easiest place to invest with all risk," Pouyanne said.
According to Rystad statistics and Reuters research, the water project would increase output at the five Iraqi fields by 2 mln bpd of the 2.4 mln bpd growth required to fulfill Iraq's 2027 targets.
Aditya Saraswat, vice president of Rystad's Middle East upstream studies, warned that completion before 2027 is doubtful.
This month, the oil minister of Iraq reopened seven investment prospects in the country's refining industry.
Even if Abdel-Ghani is successful in locating businesses interested in those projects, Iraq's refining capacity only permits a 500,000 bpd increase in oil output growth, which would take time, according to Saraswat.
In the meantime, data from the state-owned marketer SOMO showed that due to delays in infrastructure renovations at its Gulf ports, Iraq's southern export capacity had stagnated at about 3.2-3.3 million bpd for the past year.
(Source:www.reuters.com)
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