• 7 minutes Get First Access To The Oilprice App!
  • 11 minutes Japanese Refiners Load First Iran Oil Cargo Since U.S. Sanctions
  • 13 minutes Oil prices forecast
  • 17 minutes Renewables in US Set for Fast Growth
  • 5 hours Chinese FDI in U.S. Drops 90%: America's Clueless Tech Entrepreneurs
  • 2 hours Socialists want to exorcise the O&G demon by 2030
  • 2 days Is Natural Gas Renewable? I say yes it is.
  • 8 hours Good Marriage And Bad Divorce: Germany's Merkel Wants Britain and EU To Divorce On Good Terms
  • 20 hours Cheermongering about O&G in 2019
  • 1 day Duterte's New Madness: Philippine Senators Oppose President's Push To Lower Criminal Age To 9
  • 2 days Making Fun of EV Owners: ICE-ing Trend?
  • 12 hours *Happy Dance* ... U.S. Shale Oil Slowdown
  • 3 hours Russian Message: Oil Price War With U.S. Would Be Too Costly
  • 2 days Emissions from wear of brakes and tyres likely to be higher in supposedly clean vehicles, experts warn
  • 1 day North Sea Rocks Could Store Months Of Renewable Energy
  • 4 hours Oil CEOs See Market Rebalancing as Outlook Blurred by China Risk
  • 2 days Blame Oil Price or EVs for Car Market Crash? Auto Recession Has Started
Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

More Info

Trending Discussions

Iraq Facing Perfect Storm

Iraq has been pumping oil at record-high rates since the start of the year, with daily output reaching 4.31 million barrels last month, most of which was exported. Yet the figure is lower than the 4.51 million barrels produced in January, and it is likely to fall further as the government wants oil companies operating in the country to reduce spending.

Meanwhile demand is growing, especially in emerging markets.

Iraq, which is the second-biggest producer in OPEC, works with international oil companies under agreements that require the companies to coordinate their spending plans every year with the government. The reason is that they are not just extracting oil, they are also helping to develop the country’s production and transportation infrastructure in order to expand production. In exchange for this work, the government pays them in crude. Or so it was. Related: Who Will Benefit From The Electrification Of Transport?

Last week, Reuters reported that it has seen requests from the government to oil companies regarding their future investments. The requests are to lower these investments, in some cases by more than half, as the government is finding it increasingly difficult to juggle between vital exports and repayments to oilfield operators.

Like other OPEC members, Iraq is overly dependent on oil revenues. Unlike most of them, however, the country has urgent military spending needs as it tries to drive ISIS out of its north and west. Related: Why Jim Chanos is Shorting the Oil Majors

To complicate matters further and make the whole situation ironic in a way, Iraq has just become the largest supplier of oil to India, with April volumes up 41 percent on the month and 79 percent on the year, to a daily 960,700 barrels. India is pegged as the biggest driver of global oil demand in the near- to medium-term, as it takes China’s place as the world’s industrial hothouse. And Iraq may not be able to take sufficient advantage of this. Related: Are The Saudis Facing A Full-Blown Liquidity Crisis?

Iraq is in the perfect vicious circle. It needs to expand its oil production in order to take advantage of growing demand and increase its revenues, much of which it would use to continue the fight against ISIS. It cannot, however, grow production because at current oil prices and production volumes, it can’t afford to pay the oilfield operators. Without being paid, the operators will reduce their investments in Iraq’s production growth, slowing it down considerably and even possibly stopping it completely at some point before the end of this year.

None of the elements of this circle can be ignored. There’s no way of ignoring the Islamists in the north and west, and there’s no way of ignoring the demand increase. There is also no way out of the circle for Iraq, at least for the moment. If oil prices continue to rise, if there are more unanticipated production disruptions, and if the government manages to reach some kind of mutually beneficial agreement with the oilfield operators, then all could be well. The problem is, these are a lot of ifs.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News