Iraq oil production to be ‘squeezed for next decade’

Basra province was rocked by renewed violence last week as political protests regain momentum, threatening local oil facilities. (AFP)
Updated 17 September 2018
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Iraq oil production to be ‘squeezed for next decade’

  • The state-run company responsible for oil projects in mid-stream had “a spotty execution track record

LONDON: Growth in Iraqi oil production will be squeezed for the next decade despite the country being the second largest OPEC producer after Saudi Arabia and the fourth biggest in the world, according to a report by US consultancy IHS Markit.
The findings come after a week when the price of Brent crude reached $80 a barrel, with supply worries having been heightened by Hurricane Florence heading toward the US, threatening to derail US oil pipelines. Also looming large was the expected effect on supply by the reimposition of US sanctions on Iran.
IHS said that Iraq, which theoretically could produce about 7 million barrels per day (bpd), would only marginally boost output to 2028. The current 4.5 million bpd would only increase to 5 million bpd over the next decade, said IHS analyst Christopher Elsner in an interview with Arab News.
Elsner said that he may revise his forecast upward if conditions in the country improve, but on current thinking, even by 2036 Iraq’s production would only reach 6 million bpd, he said.
A former international energy infrastructure analyst at the US Department of Energy who has worked on Iraqi projects, Elsner commented: “Yes, our numbers are conservative against the official Iraqi data. There is a lot of investment in getting wells out of the ground. And there’s a lot of investment in exporting that oil. But the connections between the oil fields and the storage farms in the south and the export points have been what has really led to the bottlenecks in Iraq.”
Other impediments were the absence of electricity to run some oil fields, as well as the lack of pipelines, pumping stations and storage space — all of which have constrained capacity.
“Coordinating the purchase of various components such that you can progress without delay … has been another major issue,” said Elsner.
The state-run company responsible for oil projects in mid-stream had “a spotty execution track record,” he added. There was legal uncertainty around contracts, security risks, and water and electricity services were unreliable.
The IHS report added that Iraq’s crude oil consumption is currently 0.7 million bpd, and this was expected to grow very slowly, to 0.8 million bpd by 2030. Iraq’s crude exports are the difference between production and consumption.
The oil-rich Basra province was rocked by renewed violence earlier this month as political protests regain momentum, threatening oil facilities. Thousands of Iraqis have been taking to the streets daily over the past week, torching government buildings and political party offices.
The demonstrations have added to oil supply concerns, although these turn principally around worries about the absence of Iranian crude later this year when US sanctions kick in. India and China have begun to reduce their purchases of Iranian oil while South Korea has already dropped imports to zero on the orders of the Trump administration, according to the Financial Times.


Foreign investors hope India dials back policy shocks after Modi win

Updated 24 May 2019
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Foreign investors hope India dials back policy shocks after Modi win

  • Modi’s pro-business image and India’s youthful population have lured foreign investors
  • After Modi’s win, about a dozen officials of foreign companies in India and their advisers said they hoped he would ease his stance and dilute some of the policies

NEW DELHI: Foreign companies in India have welcomed Prime Minister Narendra Modi’s election victory for the political stability it brings, but now they need to see him soften a protectionist stance adopted in the past year.
Modi’s pro-business image and India’s youthful population have lured foreign investors, with US firms such as Amazon.com , Walmart and Mastercard committing billions of dollars in investments and ramping up hiring.
India is also the biggest market by users for firms such as Facebook Inc, and its subsidiary, WhatsApp.
But from around 2017, critics say, the Hindu nationalist leader took a harder, protectionist line on sectors such as e-commerce and technology, crafting some policies that appeared to aim at whipping up patriotic fervor ahead of elections.
“I hope he’s now back to wooing businesses,” said Prasanto Roy, a technology policy analyst based in New Delhi, who advises global tech firms.
“Global firms remain deeply concerned about the lack of policy stability or predictability, this has sent a worrying message to global investors.”
India stuck to its policies despite protests and aggressive lobbying by the United States government, US-India trade bodies and companies themselves.
Small hurdles
Modi was set to hold talks on Friday to form a new cabinet after election panel data showed his Bharatiya Janata Party had won 302 of the 542 seats at stake and was leading in one more, up from the 282 it won in 2014.
After Modi’s win, about a dozen officials of foreign companies in India and their advisers told Reuters they hoped he would ease his stance and dilute some of the policies.
Other investors hope the government will avoid sudden policy changes on investment and regulation that catch them off guard and prove very costly, urging instead industry-wide consultation that permits time to prepare.
Protectionism concerns “are small hurdles you have to go through,” however, said Prem Watsa, the chairman of Canadian diversified investment firm Fairfax Financial, which has investments of $5 billion in India.
“There will be more business-friendly policies and more private enterprise coming into India,” he told Reuters in an interview.
Tech, healthcare and beyond
Among the firms looking for more friendly steps are global payments companies that had benefited since 2016 from Modi’s push for electronic payments instead of cash.
Last year, however, firms such as Mastercard and Visa were asked to store more of their data in India, to allow “unfettered supervisory access,” a change that prompted WhatsApp to delay plans for a payments service.
Modi’s government has also drafted a law to clamp similar stringent data norms on the entire sector.
But abrupt changes to rules on foreign investment in e-commerce stoked alarm at firms such as Amazon, which saw India operations disrupted briefly in February, and Walmart, just months after it invested $16 billion in India’s Flipkart.
Policy changes also hurt foreign players in the $5-billion medical device industry, such as Abbott Laboratories, Boston Scientific and Johnson & Johnson, following 2017 price caps on products such as heart stents and knee implants.
Modi’s government said the move aimed to help poor patients and curb profiteering, but the US government and lobby groups said it harmed innovation, profits and investment plans.
“If foreign companies see their future in this country on a long-term basis...they will have to look at the interests of the people,” Ashwani MaHajjan, an official of a nationalist group that pushed for some of the measures, told Reuters.
That view was echoed this week by two policymakers who said government policies will focus on strengthening India’s own companies, while providing foreign players with adequate opportunities for growth.
Such comments worry foreign executives who fear Modi is not about to change his protectionist stance in a hurry, with one offical of a US tech firm saying, “I’d rather be more worried than be optimistic.”