Iraq to lower oil target to more prudent level
London, April 19, 2012
Iraq plans to 'slightly lower' an official 12 million barrel per day (bpd) capacity target so that its oilfields can pump more for decades to come, its top energy official said on Wednesday.
Deputy Prime Minister for Energy Hussain al-Shahristani said the new production plateau level, to be set by the end of the year, will be 'significantly higher' than a previous 8-8.5 million bpd figure suggested by Iraq's oil minister last year.
Baghdad's two oil rounds in 2009 committed foreign oil companies to boosting capacity beyond 12 million bpd by 2017. In practice they are likely to manage around half that amount, industry experts say, due to widely-flagged infrastructure bottlenecks and logistical shortcomings.
Baghdad has been reviewing that target level for nearly a year with international consultants, and Shahristani said the ministry of oil now wants to widen the discussion to the international oil companies drilling its fields.
'This is the main objective: to end up with the highest recovery possible, to extend the plateau time to perhaps 2035,' said Shahristani.
Depending on the oilfield, the 20-year service contracts now call for pumping rates to be maintained for anywhere between seven and 13 years from 2017.
Shahristani said the sustained increase in production would make up for declining output elsewhere and would meet increased demand.
'It will be more prudent for Iraq to maximise its ultimate reservoir recovery and to assure the world market of that potential - that Iraq can maintain that kind of plateau for as long as necessary,' he said.
The service contracts are production driven, and oil companies get fees for each barrel produced.
Any deep cut to Iraq's overall target could mean the deals could need to be adjusted to accommodate lower production plateaus, which would mean lower returns for oil companies in the short term.
But Shahristani said Baghdad was seeking to maintain the projects' economics.
'We will sit with the IOCs and discuss what possible revisions can be made so long as their financial interests are not impacted negatively,' he said.
'Of course we will save some money on the capital costs because you don't have to have the facilities for the higher plateau level.'
Baghdad is now three years into its ambitious oil expansion programme and the projects, led by majors such as BP, Exxon Mobil and Eni, and Royal Dutch Shell are gathering pace.
Production last year ran at around 2.7 million bpd, with exports just under 2.2 million bpd.
Shahristani said output this year had already reached 3 million bpd, which would allow for exports of some 2.4 million bpd. Iraq's export target for 2012 is 2.6 million bpd. – Reuters