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.


In nod to debt concerns, China Belt and Road summit to urge sustainable financing

Updated 44 min 35 sec ago
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In nod to debt concerns, China Belt and Road summit to urge sustainable financing

  • The Belt and Road Initiative envisions rebuilding the old Silk Road to connect China with Asia, Europe and beyond
  • But the initiative has proved controversial in many Western capitals, particularly Washington

SHANGHAI: World leaders meeting in Beijing this week for a summit on China’s Belt and Road initiative will agree to project financing that respects global debt goals and promotes green growth, according to a draft communique seen by Reuters.
The Belt and Road Initiative is a key policy of President Xi Jinping and envisions rebuilding the old Silk Road to connect China with Asia, Europe and beyond with massive infrastructure spending.
But it has proved controversial in many Western capitals, particularly Washington, which views it as merely a means to spread Chinese influence abroad and saddle countries with unsustainable debt through nontransparent projects.
The United States has been particularly critical of Italy’s decision to sign up to the plan last month, the first for a G7 nation.
In an apparent nod to these concerns, the communique reiterates promises reached at the last summit in 2017 for sustainable financing — but adds a line on debt, which was not included the last time.
“We support collaboration among national and international financial institutions to provide diversified and sustainable financial supports for projects,” the draft communique reads.
“We encourage local currency financing, mutual establishment of financial institutions, and a greater role of development finance in line with respective national priorities, laws, regulations and international commitments, and the agreed principles by the UNGA on debt sustainability,” it added, referring to the United Nations General Assembly.
The word “green” appears in the draft seven times. It was not mentioned once in the summit communique from two years ago.
“We underline the importance of promoting green development,” the draft reads. “We encourage the development of green finance including the issuance of green bonds as well as development of green technology.”
The Chinese government’s top diplomat, Wang Yi, said on Friday that the Belt and Road project is not a “geopolitical tool” or a debt crisis for participating nations, but Beijing welcomes constructive suggestions on how to address concerns over the initiative.
A total of 37 foreign leaders are due to attend the April 25-27 summit, though the United States is only sending lower-level representatives, reflecting its unease over the scheme.
The number of foreign leaders at the April 25-27 summit is up from 29 last time, mainly from China’s closest allies like Pakistan and Russia but also Italy, Switzerland and Austria.
China has repeatedly said Belt and Road is for the benefit of the whole world, and that it is committed to upholding globally accepted norms in ensuring projects are transparent and win-win for all parties.
“We emphasize the importance of the rule of law and equal opportunities for all,” the draft reads.