The one-word answer to sky-high oil prices
Iraq has the third-largest oil reserves in the world – if its government could agree on how to share oil revenues.
By David R. Francis | columnistfrom the December 17, 2007 edition
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There's a cure for superhigh oil prices: Invigorate Iraq's oil output.
"The potential is enormous," says Leo Drollas, chief economist at the Centre for Global Energy Studies (CGES) in London.
With a decline in sabotage of Iraq's petroleum facilities, oil output has risen from 2 million barrels per day (m.b.p.d.) in September to about 2.4 m.b.p.d. in November. Iraq's oil production peaked in 1990 at 3.5 m.b.p.d. and was running at 2.8 m.b.p.d. before Saddam Hussein was toppled in 2003. After that, it fell to as low as 0.5 m.b.p.d.
"Known recoverable oil reserves would allow Iraq's oil output to rise to 6 to 8 m.b.p.d., provided the economic and political climate is propitious," notes a new study by two CGES experts. Iraq's proven reserves are about 113 billion barrels, third in size after Saudi Arabia's 262 billion barrels and Iran's 133 billion (fourth, if Canada's tar sands are included in the calculation). Some say exploration could boost Iraq's reserves to more than 200 billion barrels.
Even that 0.35 m.b.p.d. increase in oil output in the last couple of months would – at, say, $80 a barrel – add $24 million a day to the Iraqi government's oil revenues. A nice chunk of change.
Reviving and expanding Iraq's oil production won't be easy. Only last week, a fire broke out at a refinery a few miles south of Baghdad. It might have been sabotage, news reports said.
There have been nearly 600 pipeline attacks in Iraq since March 2003, reports Ben Lando, United Press International's energy editor. But recent security strategies have allowed additional oil to flow in the northern pipeline through Turkey to the Mediterranean Sea – about 300,000 barrels per day, says Dr. Drollas.
Apparently, international oil companies have gotten more excited about the prospects for accessing Iraq oil. Mr. Lando writes that Oil Minister Hussain al-Shahristani hinted to him that Iraq is moving forward with oil deals despite the lack of a new national oil law.
That law has been stalled in political negotiations for more than a year. Mr. Shahristani said that oil "supergiants" could be given "technical-support contracts" to develop producing fields, Lando writes.
Presumably this would be done under the oil laws of Mr. Hussein's old regime.
With greater stability and the help of the international oil companies, Iraq could revive its production to about 3.5 m.b.p.d. in perhaps a year, Drollas reckons. Output higher than that would take five years or more, after years of drilling.
But this won't be easy. For one thing, Hussein let the oil fields deteriorate.
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