If Iraq could match its potential, it could definitely
emerge as the game changer. Yet the billion-dollar question remains: Would Iraq
ever be able to live up to the expectations?
When Iraqi Oil Minister Hussein Al-Shahristani insisted
earlier the year that Iraqi output would reach 12 million bpd by 2017, many
felt this was an unrealistic overstatement. Some termed it to be more of a
bargaining chip, so as obtain a higher output quota within OPEC, once Baghdad
begins the process back to the output quota fold.
"They are jockeying for a considerably higher output
quota within OPEC," said a senior energy analyst based in Dhahran - the
virtual global energy capital.
And Al-Shahristani's aspiration, though coated in
diplomatic language, was apparent too - the endeavor to make Baghdad the
virtual global energy capital.
OPEC output quota has remained an issue. Writing on
Middle East oil reserves in Oil Drum, the history between Iran and Iraq was
cited as an indication of the inherent quota war among the OPEC members.
"The Iran-Iraq War began in 1980 and ended in 1988.
In 1980 Iran had 58 billion barrels and Iraq 30 billion barrels of (proven)
reserves. In 1982 Iraq raised its reserves to 59 billion barrels giving it a
narrow lead. In 1986 Iran retaliated with a rise to 93 billion barrels giving
it a clear lead. But in 1987, Iraq retaliated with a knockout blow raising its
reserves to 100 billion barrels. The war ended in 1988 and the reserves of
these two countries have barley changed since."
The issue remains a hotly contested one within OPEC. And
Al-Shahristani, who may hand over the reins of the Ministry of Oil to a new
incumbent, once the new government in Baghdad takes office, knows it fully
well.
Iraq is definitely a virgin territory, as far as the
energy sector is concerned. Its potential is far from being exploited and most
analysts believe, the potential out there is huge. Some term Baghdad to be the
last frontier as far as easy oil was concerned.
And for the last almost two decades, Iraq has not been
playing to its potential. Wars, sanctions, and insurgency, regional and
sectarian infighting - all have contributed in keeping the Iraqi energy sector
in shackles.
Yet an output of 12 million barrels in the next seven to
eight years seems more a hypothetical figure than a really achievable one.
Despite the potential, most concur, that Iraq output would be somewhere in the
middle in the near future. Even the OECD energy watchdog IEA strongly feels so.
The IEA is of the opinion that Iraq will miss its target of producing 12
million barrels of oil a day by 2017 and could take another 20 years to achieve
even half that level of output.
In the just presented 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 neighboring Iran "soon after
2015".
Earlier the year, Iraq awarded licenses for the
development of 11 major oil fields and, if all targets are met and investment
of about $150 billion takes place, production should reach 12 mbpd in seven
years. But the mammoth nature of the task, the "sheer scale of the
required construction of infrastructure, coupled with political uncertainties,
suggests that the expansion of capacity will be much slower" the IEA
underlined. 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 utilized and a major expansion of the shipping ports will also be
needed". Taking all this into account, the IEA projects Iraqi output of
6.5 mbpd in the 2030s, compared with 2.5 mbpd at present.
That in itself would be an achievement - most agree.
Having potential is one thing and exploiting it to hilt
is another. And the two often do not meet - especially when the situation is
chaotic. The country, which sits on some of the world's largest oil reserves,
has struggled in the past years to push its output even close to the 3 million
bpd it saw in the late 1980s before it invaded Kuwait and saw a US military
retaliation.
A Reuter's poll conducted in October suggested Iraq's
crude oil output would rise to 2.8 mbpd by 2011 from roughly 2.5 mbpd now and
reach only 4.6 mbpd by 2015.
Now it seems, realism is finally enveloping Baghdad too.
Thamir Ghadhban, an Iraqi oil establishment insider, putting aside the
projections painted by Al-Shahristani, admits that achieving 12 million bpd by
2017 was not feasible. A former Iraqi oil minister, Thamir Ghadhban, who served
in the Iraqi cabinet after the US-led invasion of Iraq in 2003 and now advises
Prime Minister Nuri Al-Maliki on oil, told a conference in London last week
that he expected Iraq to be one of the world's leading crude oil producers by
tripling its oil output by 2017.
"I
expect we will reach a capacity of 8 million barrels per day within the next
six-seven years," Ghadhban said. This appears more realistic and closer to
the IEA projections, than Al-Shahristani's. He also underlined that in 2010
Iraq produced an average 2.35 million barrels a day, of which some 1.875
million barrels a day was exported. The rest was required to meet the domestic
consumption.
Iraq definitely has a long way to go - yet the distance
it will cover is far from clear. It will have a profound impact on the Peak Oil
theory debate too. Yet Iraq remains to be a major unknown in painting a print
out of tomorrow's energy world.
