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Iraq Rise to the No. 2 Oil Producer in OPEC
Iraq has finally overtaken Iran as the second largest oil producer in The Organization of the Petroleum Exporting Countries (OPEC) according to the International Energy Agency.
(OPEC) was founded in Baghdad, Iraq, in 1960 and is an intergovernmental organisation of twelve oil-producing countries made up of Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. OPEC headquarters are in Vienna and they host regular meetings among the oil ministers of its Member Countries.
In Iraq, the main output gains have come in Kurdistan, where the central Shia government in Iraq refutes as a self-standing oil producing area. After Saddam fell, the dictum was clear that doing business in Kurdistan will effectively bar anyone from the bigger fields in the centre and South of the country. Numbers seem to back this up with Baghdad sitting on 143bn barrels of ‘proven’ oil reserves, compared to 40bn barrels in Kurdistan.
For a time, it was a message that most big named International Oil Companies (IOCs) were happy to take onboard. So whilst IOCs signed unattractive service contract agreements, Baghdad did not follow these up with decent contracts to entice IOCs to see Iraq as a serious proposition. Therefore oil fields have not been developed and new infrastructure not built.
So some of the bigger players have now signed deals with Kurdistan as the more credible although smaller output option. It appears that Iraq may not have clearly understood the unfolding layers of the new energy world. Ten years ago, the greatest risk for IOCs wasn’t operating in high risk, uncertain return markets, but not having access to prospective elephant fields in the first place.
The global unconventional explosion has totally re-written this analysis, today if you aren’t willing to offer decent terms and conditions, investment won’t come with international players picking and choosing the best.
Taking everything into consideration, Iraq is likely to struggle to nudge output towards 4mb/d over the next few years and has squeezed out all it can from its older fields; any further gains will be attritional, at best.
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