FOCUS: Iraq's oil plans under threat

• Date: 01 June 2015
• Published date: 01 June 2015
• DOI: http://doi.org/10.1111/oet.12254

FOCUS

Iraq’s oil plans under threat

Despite continuing inc ursions by forces of Islamic State

(IS) that threaten several of its oil installations, Iraq’s

exports have been running at record levels and produc-

tion is also high and rising. A number of problems are

emerging, however, that both threaten the recent recov-

eryinexportsandproductionandBaghdad’splansfor

further increases in output.

In southern Iraq– which accounts for most of the

country’s production and exports– the problems center

on the inadequate infrastructure. In the north, by con-

trast, the problems are l argely political. B oth the fed-

eral government and the KurdishR egionalGovernment

(KRG) want to see higher production and exports from

there, but these are threatened by continuing disagree-

ment between Baghdad and Arbil over payments to the

KRG for existing exports of oil.

Record exports

Iraq’s exports of crude oil have risen steadily in 2015,

reaching a record 3,077,000 bpd in April. Of these,

2,627,000 bpd were from Iraq’s southern oilelds,

and of the remaining 450,000 bpd, some 120,000 bpd

came from Iraq’s northern elds and the remaining

330,000 bpd were from Kurdistan. While the total of

nearly 3.1 mn bpd is encouraging, it is still below the

target of 3.3 mn bpd set by the federal government for

2015 as a whole.

Exports for the rst quarter of 2015 are even further

below the government’s 3.3 mn bpd target, at 2.9 mn bpd

(see Table A). is includes some crude oil sold from

storage at the Turkish port of Cey han, which is the outlet

for the export pipeline serving Iraq’s northern elds

and the principal Kurdish elds. ere is a small, but

Table A

Iraq and Kurdistan: Crude Oil Exports, First Quarter 2015

Company/Region Volume

(mn bpd)

Iraq

South Oil Co/Missan Oil Co 2.47

North Oil Co/Midland Oil Co 0.24

Total 2.71

Kurdistan

Total 0.20∗

Iraq &Kurdistan

Total 2.91∗

∗Includes oil sold from storage

Totals rounded

Source: Iraqi Oil Ministry; KRG

Table B

Iraq and Kurdistan: Oil Prole, First Quarter 2015

Proven Reserves 144.2 bn bbl∗

Reserves Remaining 111.3 years†

(mn bpd)‡

Production 3.6

Consumption 1.0

Net Exports 2.6

∗As of 1.1.15

†Based on rst quarter’s production

‡Including NGL

Totals rounded

Source: (Reserves) Oil &Gas Journal

(Other) Pearl Oil estimate

unknown volume of oil exports from Kurdish oilelds to

TurkeyandIranbyroadtanker.Asfaraspipelineexports

are concerned,Iraq will need to export about 3.6mn bpd

for the last eight months of 2015 if it is to meet its target

of 3.3 mn bp d.

In order to export these 3.6mn bpd over this period,

Iraq will have to increase production by at least

0.7mnbpd,basedonthevolumeofexportssofar

achieved. e prospects for this at present do not appear

promising. While both Iraq and Kurdistan have ambi-

tious plans to increase production during 2015, there

are a number of obstacles in the way. Not the least of

these is the security situation, as IS continues to mount

raidsacrosslargepartsofthecountry;butthereare

also a number of problems more directly related to the

operations of the oil industry.

Trying to raise production

At 3.55 mn bpd, production of crude oil and natural

gas liquids (NGL) during the rst quarter of 2015 was

0.44 mn bpd above the same period in 2014 (see Tab le B) .

On present trends, the country is on track to exceed

its previous record annual production of 3,475,000 bpd.

which was achieved as long ago as 1979, aer which it

was depressed: rst by an eight-year war with Iran and

then by 13 years of economic sanctions following its

invasion ofKuwait, aer which came the US-led invasion

of 2003 and its violent aermath.

Iraq and Kurdistan have ambitious plans to increase

production, bot h in the short and long term. In Decem-

ber 2014, Iraq’s Oil Minister, Adal Abd al-Mahdi said

that Iraq and Kurdistan combined could produce

4 mn bpd in 2015. is is in fact lower than the tar-

get originally set for the year. e gure of 4 mn bpd

was supposed to be achieved by 2014, with a target

of 5 mn bpd for 2015. e plan was for production to

© 2015 John Wiley& Sons Ltd