Iraq to the future

The lid is about to be lifted on Iraq's vast reserve wealth.
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Iraq has the world’s third largest proven oil reserves and some of the lowest extraction costs anywhere on the planet. The fundamental difference between Iraq and its neighbours however, is that after years behind closed doors, and a prohibitive security situation, just a fraction of its known fields are in development.

According to the March 2007, review by the International Monetary Fund (IMF), in 2006, crude export revenues represented around 60% of GDP and 89% of government revenues. In 2006, the US Energy Information Administration (EIA) reported Iraq was the world’s 15th biggest oil producer and could meet 94% of its energy needs with domestic oil.

Iraq’s crude exports averaged 1.85 million barrels a day in 2008, 13.5% more than in 2007, the head of the country’s State Oil Marketing Organisation, (SOMO), said in January.

Iraq’s revenues from crude oil in 2008 reached around US$60 billion, or 33.6% more than in 2007, Falah Alamri, Iraq’s representative to OPEC, told reporters in March this year.

Oil

Experts agree that Iraq may be one of the few places left where vast reserves, known and unknown, have barely been exploited.  After more than a decade of sanctions and two Gulf Wars, Iraq’s oil infrastructure desperately needs modernisation and investment. The good news is that capital is starting to flow in.

Thus far the industry has not been able to meet hydrocarbon production and export targets since 2004.

According to the January 2007, Special Inspector General for Iraq Reconstruction (SIGIR) report, Iraq’s petroleum sector faces technical challenges in procuring, transporting and storing crude and refined products, as well as managing pricing controls and imports, fighting smuggling and corruption, improving budget execution, and managing sustainability of operations.

Oil production has not recovered to pre-war levels, and parliament and cabinet officials are working to map out investment and ownership rights that are integral to helping move the industry forward.

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Rather dated proven oil reserves sit at 115 billion barrels for Iraq, although these figures have not been revised since 2001, and are based on old seismic data from nearly 30 years ago. Recently, multinational companies, at the request of the Government of Iraq (GoI), have reopened the books on this seismic data, and begun comprehensive surveys of Iraq’s hydrocarbons reserves in locations throughout the country. Whilst certain areas remain off-limits, much of the country is safe enough to survey now.

Geologists have estimated that relatively unexplored territory in the western and southern deserts may contain an estimated additional 75 to 100 billion barrels (bbls) of recoverable oil. While internal Iraqi estimates have ranged into the hundreds of billions of barrels of additional oil, the seismic data under review by a host of international firms seem to be pointing to more conservative, but significant, increases. Iraq has the lowest reserve to production ratio of the major oil-producing countries.

The majority of the known oil and gas reserves in Iraq form a belt that runs along the eastern edge of the country. According to the GoI, Iraq has around nine fields that are considered “super giants” (over 5 billion bbls reserves) as well as 22 known “giant” fields (over 1 billion bbls).

The cluster of super-giant fields of south-eastern Iraq forms the largest known concentration of such fields in the world and accounts for 70 to 80% of the country’s proven oil reserves. An estimated 20% of oil reserves are in the north of Iraq, near Kirkuk, Mosul and Khanaqin. Control over rights to reserves is a source of controversy between the ethnic Kurds and other groups in the area.

Current Oil Production

In 2006, upstream crude production averaged 2.0 million barrels per day (bbl/d), down from around 2.6 million bbl/d of production and a claimed capacity of 2.8 to 3.0 million bbl/d in pre-invasion January 2003.
 
Currently, the MoO has central control over oil and gas production and development in all but the Kurdish territory through its two operating entities, the North (NOC) and South Oil Companies (SOC).

According to the North Oil Company’s website, their concession and jurisdiction extends from the Turkish borders in the north to 32.5 degrees latitude (about 100 miles south of Baghdad), and from Iranian borders in the east to Syrian and Jordanian borders in the west. The remainder falls under the jurisdiction of the SOC, and though smaller in geographical size, includes the majority of proven reserves.