By Stan Harbison, Vice President of Research and Analysis at energy consultants EPRINC.
A year ago, Iraqi oil officials were no doubt justifiably proud of their achievement in 2009. Against all skepticism they had in hand contractual agreements with foreign oil companies to rapidly develop over 60 billion barrels of oil reserves. It was an historic achievement. In the past year Iraq has increased its oil production by 300 thousand barrels per day. Its production level is now over 2.7million barrels per day, the highest level in 20 years. In the past several weeks, this has been confirmed by detailed ship-by-ship export volumes. The incremental production will be worth $10 billion at current prices over 2011. This will bring total Iraqi export revenues to $80 billion, $20 billion more than current government projections in the Iraqi budget.
The greatest achievement is not the increased volumes of oil. It is the concrete confirmation that the Iraq’ new oil setup is working. Contracts ratified in the early months of 2010 are dictating on-time results in the field. Out of view of the press is a tremendous amount of work that has been done. The “Boards of Director” of each project, composed equally of Iraqi and oil company officials, have met on a quarterly basis. They have refined detailed development plans. They have approved the tenders for contracts to oil service companies for drilling, seismic evaluation, assessments of oil reservoirs, construction of field infrastructure, and the installation of production equipment. These are joint government-oil company achievements.
The projects have absorbed most of the thousands of workers of Iraqis largest regional oil company, the South Oil Company. Separately, the Iraqi oil ministry and the existing Iraqi companies under its wing have:
- nailed down a firm $700 million contract to build large new export facilities,
- rebuilt much of the country’s damaged storage tank and pipeline infrastructure,
- established a process to build a massive project which will pipe seawater needed for field operations in the future, and
- progressed on plans to build critically needed pipeline capacity to export facilities.
We suspect that all the people involved in these efforts feel a combination of pride, satisfaction, determination to proceed, as well as considerable anxiety about the barriers that need to be crossed to achieve continuing success. This is as it should be. The record so far supports a strong prognosis for continuing success.
Stan Harbison has been an oil and gas analyst since 1982. He has worked as a research investment analyst for a prominent US investment firm for BP, Louis Dreyfus Commodities Energy Trading and for the US. Department of Energy. He has met regularly with top managers in the world’s largest oil companies, key officials in more than ten of the world’s largest National Oil Companies and has attended many OPEC meetings. In the past year, he has devoted all of his time on Iraq’s oil development with EPRINC, (www.eprinc.org), an independent oil analysis firm in Washington DC, which provides analysis on critical emerging issues in the oil industry. Its work is read by the public, the US Congress and key US government officials.