Iraq oil output goals unlikely to be met - report

Last Updated: Wed, Mar 31, 2010 18:10 hrs

Iraq's ambitious plans to boost crude oil production to as much as 12 million barrels per day in coming years is not likely to be met due to a myriad of challenges, IHS Cambridge Energy Research Associates said in a report on Wednesday.

These "highly ambitious plans ... are unlikely to be fully realized given political, security, operational and infrastructure challenges," noted IHS CERA, an energy sector advisory firm based in Cambridge, Massachusetts.

"Though Iraq is unlikely to meet its 'very stretch target" of elevating its capacity to 12 mbd in six to seven years, the expansion of its production capacity still represents a significant increase with strong implications for OPEC and the regional balance," the report added.

"Achieving levels around half that in the next decade would be more likely and would still constitute 'a significant expansion,'" the report emphasized.

Earlier this month, Iraqi Oil Minister Hussain al-Shahristani indicated Baghdad would consider OPEC output curbs that may keep supply well short of ambitious capacity targets. The comments raised questions over his country's planned energy expansion, analysts believe.

Iraq -- which is not currently a party to the production quota system of the Organization of Petroleum Exporting Countries -- produces around 2.5 million bpd now.

IHS CERA's current outlook for Iraq is reaching an output level of 4.3 million bpd in 2015 and 6.5 million bpd in 2020, which it said were "still big growth numbers."

Iraq's rich oil resources have suffered from underinvestment and underdevelopment for decades, but the new expansion timetable dwarfs the most rapid buildups recently seen in places such as Russia and Saudi Arabia, said Bhushan Bahree, IHS CERA's Senior Middle East Director.

"The political, security, operational and infrastructure challenges in the country, along with a likely shortage of skilled personnel, are likely to hamper progress towards such an unprecedented achievement," Bahree said.

Iraq's recent elections and current efforts to form a new government could exacerbate existing sectarian and other tensions in the country and it is unclear what approach a new government could take regarding oil contracts, the report said.

Security will also remain a concern as foreign workers and oil company operations expand in areas that have been prone to violence in the past, the report says, it added.

Iraq's plans for providing a "complex network of capital-intensive infrastructure" like ports, roads and power crucial for operations in synchronization with developing oil fields are not known -- a major potential bottleneck, it said.

Citing an example, he said, it took key OPEC producer Saudi Arabia, which has significant security and infrastructure advantages over Iraq, between four and five years to expand its net output capacity by some 2 million barrels per day.

"Iraq will certainly be challenged to match this pace, much less exceed it," Bahree added.