The Rising Influence of Rising Affluence

[DewDiligence]

Iraq Oil Production Reaches 2.7M boe/d

http://online.wsj.com/article/SB10001424052748704030704576069601478986800.html

›JANUARY 8, 2011
By HASSAN HAFIDH

Iraq has raised crude-oil output by some 300,000 barrels a day, to about 2.7 million barrels a day, since a handful of foreign oil firms began redeveloping some of the country's biggest fields, according to a senior Iraqi oil official.

The gains represent some of the first, early fruit from two rounds of oil-licensing deals between Baghdad and big, international oil firms. Abdul Mahdy al-Ameedi, head of Iraq's Petroleum Contracts and Licensing Directorate, said in an interview on Saturday that the gains were sustainable, and that Iraq now expected to hit three million barrels a day by the end of this year.

"We are hoping to reach a total of three million barrels a day by the end of 2011," Mr. Ameedi said. The upbeat assessment is the latest from Iraqi oil officials, who started to predict an uptick in oil output late last year, as international firms that won development deals in 2009 started drilling, mostly in Iraq's oil-rich south.

Iraq has set an ambitious target of increasing daily output to some 12 million barrels a day in less than a decade. Iraqi oil output has been stuck at 2.5 million barrels a day or less since it recovered after the U.S.-led invasion in 2003.

Many experts, including international oil executives and even some Iraqi oil officials, say the 12-million-barrel target is unlikely to be met. Already firms have complained about the difficulty in getting supplies into Iraq amid big bottlenecks. Tricky engineering problems, including how to finance and build a massive water-injection system needed to boost output in future development, are still unresolved.

But even a much more modest increase in output would be welcome news for Iraq and the world. Iraq relies on oil sales for roughly 95% of its revenue. At the same time, global oil prices are climbing again, hovering recently around $90 a barrel for U.S. benchmark crude.

Iraq's ability to quickly ramp up production could meet some of the rising demand from China and other developing economies, which has contributed to the recent price rise. That could cool prices.

Mr. Ameedi said production at the supergiant Rumaila oil field, Iraq's largest, in the southern Basra governorate, has reached 1.275 million barrels a day—a 20% increase. Production at Rumaila, which is being developed by a consortium led by BP PLC and China National Petroleum Corp., is expected to hit a total of 1.5 million barrels a day by the end of this year, he said.

Output at Zubair, developed by a partnership led by Italy's Eni SpA, has increased to 265,000 barrels a day, a 45% increase, Mr. Ameedi said.

A consortium led by Exxon Mobil Corp. has increased production by 11,000 barrels a day from Iraq's West Qurna Phase 1 oil field in southern Iraq, Mr. Ameedi said.

Baghdad's 20-year service contracts oblige investors in producing oil fields to boost output by 10% above an agreed baseline rate within three years in order to start getting paid costs back. Rumaila reached the 10% increase in early December. Zubair hit the required increase in November, Mr. Ameedi said.‹