Tuesday, January 24, 2012

Iraq Sees Growth In Its Oil Industry In 2011, Will Continue Into 2012


Iraq’s oil industry saw three important trends in 2011. First, exports were up nearly 200,000 barrels a day over the previous year’s average. More importantly, because of unrest in the Middle East, the price for Iraqi crude consistently stayed over $100 a barrel for the entire year, which added an extra $2 billion a month in profits for the country. At the same time, foreign sales hit a plateau, because of Iraq’s aging infrastructure. That could change this year as a new terminal is coming into operation, and two more may be working by the end of 2012. Overall, the growth that Iraq’s petroleum saw in 2011 could continue into the new year as well.
A worker at the Rumaila oil field in Basra, the largest operating in Iraq (Reuters)
For 2011, Iraq saw new highs in exports and profits. For the year, it exported an average of 2.16 million barrels a day. That was up from 1.89 million barrels in 2010. October saw the lowest amount at 2.08 million barrels, while June had the highest at 2.27 million. Iraqi crude sold for an average of $104.96 a barrel last year, which was more than $25 above the 2010 price of $75.62. That allowed Iraq to average $6.907 million in profits each month, compared to $4.352 million in 2010. With continued unrest in the Middle East such as the sanctions against Iran, prices can be expected to stay at around the same price throughout 2011. That means the country’s added production is coming on line just at the right time to benefit from the international situation.

Iraq Oil Exports And Profits 2010-2011
Month
Avg.
Exports
(Mil/
Bar/
Day)
Avg. Price Per Barrel
Revenue (Mil)
Jan. 10
1.92
$73.97
$4.441
Feb.
2.05
$73.04
$4.229
Mar.
1.84
$76.20
$4.351
Apr.
1.80
$79.66
$4.222
May
1.88
$73.85
$4.335
Jun.
1.86
$71.10
$3.889
Jul.
1.82
$71.21
$4.009
Aug.
1.82
$71.43
$3.957
Sep.
2.02
$73.07
$4.428
Oct.
1.91
$77.10
$4.526
Nov.
1.92
$80.59
$4.618
Dec.
1.95
$86.31
$5.222
2010
1.89
$75.62
$4.352
Jan. 11
2.16
$90.78
$6.082
Feb.
2.20
$98.44
$6+
Mar.
2.15
$107.13
$7.167
Apr.
2.14
$114.26
$7.342
May
2.22
$108
$7.45
Jun.
2.27
$105.16
$7.173
Jul.
2.16
$108.80
$7.3
Aug.
2.19
$104.92
$7.124
Sep.
2.10
$104.89
$6.619
Oct.
2.08
$104.43
$6.742
Nov.
2.13
$106.59
$6.833
Dec.
2.14
$106.19
$7.062
2011
2.16
$104.96
$6.907

Iraq’s exports are due for a boost in 2012. In February, the first of three new floating terminals is due to open in Basra, each with a capacity of 900,000 barrels a day. This is part of a $1.3 billion improvement plan to increase the flow of oil through the southern port. In total, two new undersea pipelines, one on shore pipeline, and three single point moorings are due to be completed. Basra is currently exporting an average of 1.7 million barrels a day. By the end of the year, it is supposed to have an added capacity of 2.7 million barrels. There are also plans for a third pipeline and a fourth floating terminal, plus a fourth bidding round for five oil and seven natural gas fields. Nearly two-thirds of Iraq’s exports flow through the Basra governorate, because it has the majority of the country’s oil reserves, and its only port. That’s why all of Iraq’s current plans are for the south rather than the north. Expanding its infrastructure is badly needed if Iraq ever hopes to take full advantage of its most important natural resource. The only question is when these projects can be completed, because there are always delays in Iraq.

Even with this new equipment, Iraq is unlikely to reach its production targets. In 2009, the Oil Ministry said that it wanted to reach 12 million barrels a day in capacity by 2017. That would be the greatest increase in world history. The statement was probably made for political reasons, to show that Iraq was going to be a player in the international oil scene once again, now that Saddam was gone, and international sanctions were over. Now the government is quietly talking with consultants to lower those expectations and extending its deadlines. That would mean renegotiating the contracts with the foreign oil companies it signed deals with in 2009. Some alternative numbers were offered by Shell that estimated that Iraq would reach 5-6 million barrels a day in production in ten years. British Petroleum predicted a mark of 4.5 million barrels by 2010, and 5.5 million barrels by 2030, the International Energy Agency believed Iraq could reach 6 million barrels by the 2030s, while the United State Energy Information Administration thought that Iraq could achieve at best, 8.3 million barrels by 2035. The problem is until Iraq adds all of its planned infrastructure it will continue to be plagued by bottlenecks. There are also on-going political disputes over a new oil law, plus attacks by insurgents on pipelines and oil facilities. Altogether those pose daunting issues for Iraq to overcome to reach its true potential.

Iraq saw a slight growth in oil exports in 2011, but dramatically larger profits. It needs to continue to grow its infrastructure, so that it can take advantage of the high oil prices while they last. Iraq depends upon petroleum for nearly 90% of its revenue. The country has so many needs after twenty years of sanctions and wars it has to earn as much as it can. Fortunately, some of its projects are finally coming to fruition, so that capacity will increase. That means exports and profits will continue to go up into 2012.


SOURCES

Ajrash, Kadhim and Razzouk, Nayla, “Iraq December Crude Exports, Revenue Rise to 4-Month High,” Bloomberg, 1/23/12

Aswat al-Iraq, “Iraqi oil exports and revenues for December 2011 released,” 1/22/12

Hafidh, Hassan, “Iraq 2011 Oil Exports +12.7% On Year At 2.165 Mln B/d – SOMO,” Dow Jones, 1/5/12
- “Iraq Delays Energy Bidding Round To April:Official,” Market Watch, 1/4/12

Al-Khayat, Faleh, “Iraq’s oil exports reach 2.145 million b/d in December: SOMO,” Platts, 1/3/12

Lando, Ben, “Despite nationwide investment, Exxon has Iraq output doubts,” Iraq Oil Report, 1/3/12

Mackey, Peg, “Exclusive: Iraq to lift oil exports 400,000 bpd through March,” Reuters, 1/17/12

Rasheed, Ahmed, “Iraq to export oil from new Gulf terminal in February,” Reuters, 1/3/12

Reuters, “Consultants to Review Iraq Oil Targets,” Iraq Business News, 12/6/11

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