Iraqi oil: There’s plenty of it, but can Opec cope?

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June 1, 2010

Iraqi oil: There’s plenty of it, but can Opec cope?Carl Mortished, International Business Editor Recommend?

Inch by inch, Iraq is crawling out from beneath the rubble of a warzone and building an energy colossus. Increasingly, too, there is help at hand to turn its oil and gas resources into gold.

A clutch of big oil multinationals has entered into service contracts with the country to develop several huge oilfields, including Rumaila, a monster that already delivers 1.1 million barrels per day, almost half of Iraq’s current output.

BP is charged with raising the bar at Rumaila and by 2016 it expects output to reach a plateau of 2.8 million bpd, a level greater than the present output of every Opec state except Iran and Saudi Arabia.

Others have joined the drilling frenzy. Shell, ExxonMobil, Italy’s Eni and Statoil of Norway are working alongside Russia’s Lukoil and Petronas, the Malaysian company, and this month CNOOC, the Chinese state oil company, put its shoulders behind Iraq’s oil reconstruction. The total potential is about 12 million bpd by 2016, equal to existing estimates of Saudi Arabia at maximum throttle.

But Iraq is a huge headache for Opec, the oil cartel of which it is a passive member. Iraq has not had an oil output quota since 1998 because of the sanctions against Saddam Hussein’s regime. Its quota was almost equal to Iran, at 3.9 million bpd, reflecting the rivalry of the two countries, but war and neglect took their toll on Iraq’s oil industry and output is now 2.4 million bpd.

The question is how Opec will bring Iraq back into the fold. Unless global demand for crude soars over the next five years, big cuts in the output of Saudi Arabia and the other Gulf states will be needed to accommodate it.

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article7141342.ece