Iraq Oil Output Beating Iran Ends Saddam Legacy
By Nayla Razzouk and Anthony Dipaola on May 11, 2012 Tweet Facebook LinkedIn Google
OPEC Output Boost Is Right Decision, Analyst Says
Iraq, seeking to more than double oil output by 2015, is poised to overtake Iran as OPEC’s second- largest producer by the end of the year as sanctions hobble crude production in its Persian Gulf neighbor.
Iraq is pumping at the highest rate since Saddam Hussein seized power in 1979, supported by foreign investors such as Exxon Mobil Corp. and BP Plc (BP/) that are developing new fields and reworking older deposits. The country produced 3.03 million barrels a day in April, 7.7 percent more than in March, while Iranian production declined to 3.2 million barrels a day, according to an OPEC monthly report yesterday. Iraq’s output last exceeded Iran’s in 1988, when the countries ended their eight-year war, statistics compiled by BP show.
With rising oil supply from Libya and Saudi Arabia, the recovery of Iraq’s biggest foreign currency earner is helping alleviate concern that a European Union embargo on Iranian crude starting July 1 will squeeze global supply. Tensions over Iran’s nuclear program and the prospect of curbs on its oil sales pushed Brent crude to a 3 1/2-year high of $128.40 a barrel on March 1. Oil fell as low as $111.40 today.
“Iraq appears to be a steady and growing producer,” Victor Shum, managing director at consultant Purvin and Gertz Inc. in Singapore, said in a telephone interview yesterday. “That’s certainly a positive for world supply as there have been lingering concerns on output and spare capacity.”
Exploration License Round
The Organization of Petroleum Exporting Countries plans to meet next month in Vienna to assess output after absorbing Iraq into its quota system when the group’s ceiling was raised to 30 million barrels a day at a meeting in December. Oil prices of $100 to $120 a barrel are “acceptable” and won’t damage the world economy, Iraqi Oil Minister Abdul Kareem al-Luaibi said in an interview yesterday in Baghdad.
Iraq holds the world’s fifth-largest crude reserves, according to data from BP that include Canadian oil sands. Production has revived since the U.S.-led invasion of 2003 ended more than two decades of stagnation caused by wars, sanctions and underinvestment. Since Hussein’s ouster, the government has awarded 15 oil and gas licenses to foreign companies, and 47 potential bidders have signed up for its next auction of exploration rights scheduled for May 30.
“Iraq is on the upswing,” Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas SA in London, said in a telephone interview yesterday. “With all the investment coming in, with people developing new areas or trying to expand output at existing fields, it was a foregone conclusion that production would rise. There was a question mark over stability and security, but that’s been mostly OK.”
The country is targeting production of 3.4 million a day this year and more than 4 million barrels in 2013, according to Asim Jihad, a spokesman for the Oil Ministry in Baghdad. Exports will increase to 2.9 million barrels in 2013 from a current level of 2.5 million barrels, al-Luaibi said yesterday.
Export shipments from Iraq surpassed those of Iran during the first quarter of the year, David Fyfe, head of the International Energy Agency’s market and industry division, said on May 7 in Bahrain. Iranian sales dropped by 400,000 barrels a day to 2.1 million barrels a day for the period, Fyfe said, while ministry data show Iraq shipped a daily average of 2.145 million barrels in the quarter and 2.5 million in April.
Crude exports from Iran averaged 1.8 million barrels a day in April, the agency said today, citing traders it didn’t identify. As much as 35 million barrels may be held in floating storage, compared with 8 million in March, it said.
Iranian output may suffer further as tougher international restrictions take effect, falling an additional 600,000 to 700,000 barrels a day once the new sanctions are in place, the IEA’s Fyfe said in a telephone interview today.
Bottlenecks for shipments from southern Iraq, where energy companies are making most of their investments, have eased with the construction of two offshore mooring facilities for supertankers. Another two units will be built in coming months. The country will generate $100 billion from oil sales this year, according to al-Luaibi.
“Asian markets, chiefly China and India, have become very important for Iraq’s crude exports over the last few years, making up 60 percent of Iraq’s total crude exports,” Jihad said. “Crude exports to Asia are still on the rise.”
As the sanctions made it more difficult for importers to buy Iranian petroleum, Iraq overtook Iran to become the second- largest supplier of crude to India after Saudi Arabia in the 12 months through March, according to data from the Associated Chambers of Commerce and Industry of India.
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