Baghdad has approved an increase in Iraq’s crude oil production capacity to as much as 6.5 million bpd by 2022. This compares to a current production capacity of below 5 million barrels and production rates—as reported by the local energy ministry—of around 4.4 million bpd as per its OPEC quota.
Crude oil export income accounts for the bulk of government revenues and is likely to continue to do so for the observable future as diversification options are few and the funds needed for a shift away from oil can only come from oil.
This huge dependence on crude revenues has made Iraq the focus of doubts around compliance with the 2016 OPEC+ production cut deal, with many expecting that the cartel’s number-two producer will be the first to start cheating.
Indeed, Iraq has fallen consistently short of complying with its quota of 4.35 million bpd, but its underperformance has been more than offset by Saudi Arabia and Venezuela. Iraq was also the hardest OPEC member to convince that the cuts were necessary. Now the country is in line, apparently sticking to whatever OPEC decides in terms of further extensions of the deal. At the same time, however, it is planning a tender for 11 new fields later this month. Related: EV Revolution Could Cost Thousands Of Jobs
The tender, to take place in mid-April, will offer fields in the eastern and southern parts of Iraq. According to the energy ministry, 13 foreign oil companies have signed up for the event, at which the fields will be announced.
Meanwhile, Oil Minister Jabbar al-Luiebi recently told media that Iraq’s proven crude oil reserves could be much higher than previously estimated. Last year, Iraq updated the estimate for its proven reserves to 153 billion barrels from 143 billion barrels, but if Luiebi is right, the figure could actually be double the 2017 estimate. This would make Iraq the country with the largest proven oil reserves in the world.
By Irina Slav for Oilprice.com
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Of more than eighty major oilfields discovered in the country, only about twenty-one have been partially developed.
Iraq depends on the oil revenue for more than 90% of its budget. And without diversification, Iraq will also be vulnerable to the volatility of the oil prices well into the future, hence its aim to raise its oil production capacity.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London