November 4, 2010

Iraq to Miss Oil Target, says IEA

According to the Financial Times, which received advance word of the new IEA report on world oil, Iraqi oil production will in the future be far from the 12 million barrels a day predicted by Iraqi oil authorities.
Iraq will miss its target of producing 12m barrels of oil a day by 2017 and could take another 20 years to achieve even half that level of output, says the International Energy Agency.

In a draft of its annual World Energy Outlook report, the IEA gives a downbeat assessment of Iraq’s ambitions. However, it predicts its crude oil production will overtake that of neighbouring Iran “by soon after 2015”.

Iraq has awarded licences for the development of 11 major oilfields and, if all targets are met and investment of about $150bn takes place, production should reach 12m b/d in seven years. But the IEA stresses the mammoth nature of the task, saying that the “sheer scale of the required construction of infrastructure, coupled with political uncertainties, suggests that the expansion of capacity will be much slower”.

The report notes that “basic infrastructure, including road, bridges, airports and water supply, are all in need of repairs and expansion”.

Meanwhile, Iraq’s “existing export routes are also fully utilised and a major expansion of the shipping ports will also be needed”. Taking all this into account, the IEA projects Iraqi output of 6.5m b/d in the 2030s, compared with 2.5m b/d at present.

However, the IEA also forecasts that Iraqi production will almost double in the next decade, reaching 4.8m b/d by 2020. It adds that the country will surpass Iran in terms of crude output by “soon after 2015”.
Early Warning, in a January 2010 post, gives an extensive discussion of the likelihood of an increase in Iraq production to 12 mbd. As a graph accompanying the post shows, the target entails a quadrupling of the 3mbd level reached in the late 1970s (after which war and embargo reduced production levels). 

Such an increase to 12 mbd would have huge implications. Were it to occur, EW noted, it would "delay the final plateau of oil production by a decade (ballpark), make that plateau be at a higher level (95-100mbd ballpark), and significantly moderate oil prices in the meantime, with even some possibility of causing a serious breakdown of OPEC discipline and a period of significantly lower prices akin to the 1980s-1990s lull (though probably not as long or as deep a lull as that)." That, in turn, "would likely have profound consequences for alternative energy projects, biofuel companies, and automobile fuel efficiency. A period of lower oil prices will put adaptation projects on hold for the duration. . . . To use Richard Heinberg's party metaphor it's as though Dick Cheney and his crew managed to organize one last trip to the liquor store before everyone was too blind drunk to drive. Now the party can stagger on till everyone is really wasted. Sprawl in the US and Europe, sprawl-enabled-obesity, SUVs, growing Chinese auto-dependence, growing carbon emissions etc, all get a new lease on life."

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