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Outlook for Iraqi Crude Oil
Production and Exports
Muayyad Al-Chalabi
Axelrod Energy Projects LLC
Columbia University
School of International and Public Affairs
December 3, 2012
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Overview
•
•
•
•
•
Brief history of the Iraqi oil sector
Iraqi reserves
Development contracts
Infrastructure development
Challenges
– Internal
– External
• Conclusion
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Brief history of Iraqi oil sector
• 1912: Establishment of the Turkish Petroleum Company to
negotiate an oil concession from the Ottoman Empire
• 1920: TPC receives concession from the British Mandate in
Iraq.
• 1927: Oil struck near Baba Gurgur. Broad international
participation in the TPC.
– 75 year term for exploration rights
– Iraqi government would receive royalties on production, but
royalties contingent on oil company profits, and not payable for
the first 20 years
• 1930: 70-year concession negotiated by the Iraq Petroleum
Company (IPC)
• 1932: British mandate ends, but Hashemite monarchy
maintains a pro-western stance.
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Brief history (continued)
• 1951: Mossaddegh nationalizes oil operations in Iran.
British led embargo on Iranian oil. Mossadegh
overthrown in 1953.
• 1958: Hashemite Kingdom overthrown by Abd al-Karim
Qasim
• 1959: Qasim withdraws Iraq from Baghdad Pact
• 1960: Iraq helps found OPEC. Qasim threatens legislation
to revoke a large portion of the concession granted to the
IPC.
• 1963: Qasim ousted in Ramadan Revolution.
• 1968: Ba’ath Party rises to power.
• 1972: IPC nationalized
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Brief history (continued)
• 1979: Saddam Hussein assumes presidency
• 1980–1988: Iran-Iraq War
• 1990–1991: Gulf War I.
– 1990–2003: Sanctions on Iraq. No-fly zones
enforced.
– 1995–2003: UN Oil-for-Food Program
• 2003–2011: Gulf War II
– 2007: The military surge
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0
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The "Surge" (2007)
IOC reentry (2008)
Gulf War II (2003)
Oil-for-Food Program
(1996)
Invasion of Kuwait (1990)
Gulf War I (1991)
Iran-Iraq War ends (1988)
Saddam Hussein (1979)
Iran-Iraq War (1980)
IPC nationalized (1972)
Ba'ath Party (1968)
Ramadan Revolution
(1963)
OPEC formed (1960)
Qasim Coup (1958)
Iraq oil production (1958-2012, kb/d)
4000
3500
3000
2500
2000
1500
1000
500
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Iraq proven oil reserves
Iraq Historical Proven
Reserves (billion barrels)
160
Oil Reserves in the ME by
Country (million barrels)
Country
2012
140
Saudi Arabia
264,520
120
Iran
151,170
100
Iraq
143,100
80
Kuwait
101,500
60
UAE
97,800
40
Qatar
25,380
Oman
5,500
Syria
2,500
Yemen
3,000
20
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
0
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Iraqi oil fields
Fields
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Region
Reserves
(bbl)
West Qurna
South
43.0
Rumaila
South
17.0
Majnoon
South
12.6
Kirkuk
North
8.6
East Baghdad
Middle
8.1
Halfaya
South
4.1
Zubair
South
4.0
Missan
Middle
2.5
Bai Hassan
North
2.3
Najmah
North
0.9
Gharaf
Middle
0.9
Qayarah
North
0.8
Other
38.2
Total
143.0
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Oil Development Contracts
• Iraq model contract
Type
Ownership of
Extraction
Rights
Ownership of
Production
Concession
IOC
IOC
Joint
Venture
Shared
Shared
Production
Sharing
State
Shared
Services
Contract
State
State
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– 20 year service agreement
– Government has 25% stake
in operating company, IOCs
have remaining 75% stake
– Government pays the
operating company a fixed
fee of ~$2 per barrel for oil
produced.
– IOC not granted exclusive
rights to either exploration
or production
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Iraq oil development contracts
First Round (2009)
Second Round (2010)
Field
Region
IOC
Rumaila
South
BP, CNPC
1,750
West
Quarna
South
EM, Shell
Zubair
South
Misan
South
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PPT
(kb/d)
Field
Region
IOC
Majnoon
South
600
Halfaya
South
ENI,
Occidental,
Kogas
400
Qaiyarah
North
Shell,
Petronas
CNPC, Total,
Petronas,
Sonangol
South
CNOOC
275
West
Qurna (II)
Garraf
Badra
East
Najmah
North
South
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Lukoil,
Statoil
Petronas,
Japex
Gazprom,
Kogas,
Petronas,
TPAO
Sonangol
PPT
(kb/d)
1,800
535
120
1,800
230
170
110
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Infrastructure expansion
• Pipeline overhaul and construction
– Construction of new on-shore pipelines (6,000 km)
– Construction of new off-shore pipelines (300 km)
• Oil storage expansion
– Final storage capacity of 60 million barrels
– Add 20 million barrels to existing facilities
– Build new tank farms with 30 million barrels
• Common seawater supply facility (12-15 mb/d)
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Pipeline infrastructure
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Loading terminal infrastructure
• Loading terminal expansion
– Final capacity of 4.8 mb/d
– Expand existing loading
terminals with an additional
capacity of 1.6 mb/d
– Construct 4 new single point
moorings (SPMs) with a total
capacity of 3.2 mb/d
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Iraq crude oil production
• In July 2012, Iraq becomes second largest producer
of oil in OPEC at 3 mb/d
• Robust production growth since 2007
– Improved security environment since 2007
– IOC investments since 2009
• Iraqi government officially projecting 12 mb/d by
2017.
– By comparison, Saudi Arabia’s total production capacity
is 12 mb/d, with actual production between 8-10 mb/d.
– Production targets written into contracts with IOCs total
8.8 mb/d.
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Iraq oil production and exports
Iraq oil production and exports
(kb/d)
– Small domestic refining
capacity
– No new domestic refining
capacity expected until 2019
– Small domestic power
generation demand
• Any additional crude
production to be exported
3,500
3,000
2,500
2,000
Exports
1,500
1,000
500
Domestic Use
0
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
• Robust production growth
• Domestic demand
Consumption
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Production
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Internal challenges
KRG territory
• Lack of a comprehensive
hydrocarbon law
• Dispute with the Kurdistan
Regional Government
– KRG has its own hydrocarbon
law, and has negotiated
independent contracts with
IOCs on that basis
• Baghdad has banned IOCs
doing business with the KRG
from bidding on any future
contracts
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External challenges
• OPEC production quotas
– Iraq exempt since 1998
– Iraq’s production quota has been absorbed by Saudi
Arabia, the UAE, Venezuela, and others
– Iraq set to reenter the production quota system in 2014.
– Conflicting interests
• Need to maintain prices (total production quota cannot rise
significantly). Iraq needs $90 per barrel crude in order to meet
budgetary requirements.
• Need to carve out a space for Iraq in the production quota
system
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External challenges
• Historical rivalry with Iran
– Growth in Iraq oil exports has gone to fill the gap left by sanctions
on Iran
– Iran is currently the number two country (both in terms of reserves
and production quota) in OPEC
– Traditionally, Iran has maintained parity with Iraq in OPEC.
– Currently cooperative relationship with Iran may deteriorate
rapidly if Iraqi production and exports grow rapidly
– Iran has effective control over the Straight of Hormuz
• Security of pipeline routes to the Mediterranean
– Kirkuk-Ceyhan pipeline is frequent target for Kurdish separatists.
– Pipeline to Syria will not materialize in the short run
– Pipeline through Jordan makes no strategic difference.
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External challenges
• Softening demand
– Slow growth in European markets
– Slowing growth in Asian markets
• Rising supply in North America
• Shale oil backing out imported conventional oil
• North America moving towards energy independence
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