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.


India names Modi demonetization backer as cenbank head

Visitors are seen standing next to a logo of the Reserve Bank of India (RBI) at the bank's head office in Mumbai on December 5, 2018. (AFP)
Updated 12 December 2018
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India names Modi demonetization backer as cenbank head

  • Das — a high-profile backer of Modi’s controversial 2016 move to scrap high-value currency notes, known as demonetization

MUMBAI: Ex-finance ministry official Shaktikanta Das took charge of the Reserve Bank of India on Tuesday, in a swift appointment expected to ease a dispute with the government as it pushes for looser credit rules ahead of a general election.
The announcement by Prime Minister Narendra Modi’s administration came just a day after Urjit Patel resigned from the post, following months of clashes between the two institutions over lending curbs and how to deploy the central bank’s surplus reserves.
Pressure on the RBI to take immediate steps to boost the economy, including a transfer of the excess reserves to the government, could well rise after Modi’s ruling Bharatiya Janata Party (BJP) suffered likely election losses in three key states on Tuesday.
Das — a high-profile backer of Modi’s controversial 2016 move to scrap high-value currency notes, known as demonetization — will serve a three-year term as governor, effective immediately.
RBI watchers said they expected the 61-year-old, who retired last year as secretary of the department of economic affairs having previously served on the RBI’s board, to put relations between the Mumbai-based bank and the finance ministry in New Delhi on a stabler footing.
Investors will also look closely at his ability to hold up against outside influences after recent efforts by the Modi government to gain greater control over the central bank’s regulatory powers.
“The incoming governor will have to work hard to prove that he has his own independent mind,” said Deepak Jasani, head of retail research at Hdfc Securities.
Investors said any openly political appointee with little macro-economic experience, would not sit well with financial markets that already sold off following the BJP’s election setbacks.
But Ashish Vaidya, executive director and head of trading at DBS Bank in Mumbai, said he expected India’s debt and currency markets to react positively.
“He is a bureaucrat...We expect the RBI to take a pragmatic approach under him, be pro-growth and change its stance going ahead given that inflation has come off sharply,” he said.
Finance Minister Arun Jaitley told Reuters partner ANI that the government acknowledged the bank’s independence.
“Government will fully support the RBI and coordinate with it in areas where consultations of government are required to make sure India’s economy benefits from both government policy decisions and areas which fall within domain of the RBI,” ANI tweeted, quoting Jaitley.

SWIFT APPOINTMENT
Pronab Sen, India’s former chief statistician, said he was surprised by the speed of Das’s appointment.
“If you have a situation where a position as important as the governor of the RBI is filled within 24 hours of the resignation of the incumbent, that will raise eyebrows,” Sen told Reuters.
“People are going to say, clearly this guy had already been identified. And, the situation was created where Urjit Patel had to quit.”
Das — widely seen as a contender for the top RBI job after Raghuram Rajan’s term ended in 2016 — did not answer calls from Reuters to his mobile phone.
RBI officials who have worked with him closely said Das was likely to be more inclusive in the decision-making process than Patel.
“He has a balanced approach and is good at consensus building,” said a former deputy governor. .”..We have had our fair share of differences. But he has always been solution-centric rather than festering on those differences.”
Das worked in the finance ministry under both Modi’s government and the previous coalition led by the main opposition Congress party and was also involved in drafting the Insolvency and Bankruptcy code aimed at protecting small investors.
He came under fire for his pro-demonetization stance and was the most vocal bureaucrat at the time Modi withdrew the high-value bank notes to fight tax evasion.
Das last year criticized the methodology of global rating agencies and sought a sovereign rating upgrade for India.