Iraq’s new energy strategy sees crude production almost triple by 2020

A ship is connected to the Basra oil terminal twelve nautical miles off the Iraqi coast (file). Iraq has launched a new energy strategy that envisages the country’s crude oil production to almost triple to 9mn bpd in 2020.

By Hassan Hafidh/Dow Jones

Iraq launched yesterday a new national energy strategy that envisages the country’s crude oil production to almost triple to 9mn bpd in 2020, but appears to be a scaling back ambitions to reach 12mn bpd previously envisaged by 2017, a senior Iraqi government official said.

Under its new Integrated National Energy Strategy, or INES, Iraq examined low, medium and high production growth scenarios in light of the needs of both Iraq and the world oil market, and has gone for the medium option, said Thamir Ghadhban, top energy adviser to Iraqi Prime Minister Nouri al-Maliki and also chair of the INES committee.

The strategy, which has been under preparation for the last two years in co-operation with the World Bank and consultancy Booz & Co, envisages three scenarios for increasing Iraq’s crude oil production. The so-called ‘medium scenario’ is to bring Iraq’s production to 9mn bpd in the next seven years from around 3.2mn bpd a day now.

Iraq’s crude oil output prediction is sharply different from those given by the International Energy Agency in December when its first energy outlook on Iraq in decades envisaged 6.1mn bpd in 2020.

The first scenario of the INES plan takes production to 13mn bpd in 2020, while the third takes production to only 6mn bpd, which is close to the IAE’s prediction.

Under the medium growth scenario, it means Iraq will be exporting a hefty 8mn bpd, while 1mn bpd will be fed in local refineries.

However, there remains scepticism about whether Iraq will be able to achieve any of these targets. Poor infrastructure, the need for huge water injection system and a network of pipelines to be built particularly in southern Iraq are hurdles that could hinder production targets.

Another problem facing Iraq is whether the global oil market would be able to absorb such a high target from Iraq, particularly since the oil demand picture on crude produced by Organisation of Petroleum Exporting Countries doesn’t look that encouraging following the shale oil production boom from North America.

US oil production has risen to a 21-year high, thanks to oil unearthed from shale rock formations beneath the plains of Texas and North Dakota by a new combination of technologies called fracking. Opec’s own analysts forecast that demand for its oil will fall by 400,000 bpd this year

Opec members-such as Angola, Nigeria and Algeria-whose oil exports to the US have been displaced, will need to seek out new buyers for their crude oil, Opec delegates said at last month’s meeting in Vienna. Countries such as Iraq and other Gulf States have so far not been affected by the US shale oil bonanza as most of their output goes to big consumers in Asia, such as China and India.

The other issue facing Iraq will be how Opec, an organisation that it helped found, would accommodate the new proposed target from Baghdad.

Iraq has been able to raise crude oil output rapidly after signing mega projects with some of the world’s largest oil firms. Production has hit 3.2mn bpd now from 2.5mn bpd a year ago. Export is now around 2.5mn bpd from less than 2mn bpd a year ago.