The International Energy Agency (IEA) expects oil production from Iraq to grow rapidly during the current decade and possibly reach 6.1 million barrels per day (B/D) by 2020. This production level would be more than double what Iraq is currently producing.
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The IEA study was released on Oct. 9, 2012, and it makes a range of estimates on Iraqi crude oil production growth over the next few decades. The IEA's Central Scenario projects that Iraqi oil production will increase at a 9.6% compound annual growth rate (CAGR) through 2020, reaching 6.1 million barrels per day by 2020. Crude oil production is estimated to grow at a 5% CAGR from 2010 to 2035, and reach 8.3 million barrels per day by 2035.
These projections incorporate assumptions regarding Iraq's gross domestic product (GDP) growth and infrastructure development through 2035, as well as a positive outlook on future crude oil prices over the next 25 years. The IEA also released a high-case scenario on Iraqi oil production growth through 2035, with more optimistic assumptions. This scenario projects that oil production would reach above 9 million barrels per day by 2020, and 10.5 million barrels per day by 2035. The Delayed Case scenario uses pessimistic assumptions on the factors described above and projects oil production of 4 million and 5.3 million barrels per day in 2020 and 2035, respectively.
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Iraq has enlisted foreign oil and gas companies to help increase the productivity of its fields, and has held four bidding rounds since 2009. The Iraqi Ministry of Oil estimates that Iraq has 143 billion barrels of proved oil reserves and 215 billion barrels of undiscovered oil resource potential. The West Qurna field is Iraq's largest oil field, with an estimated 43 billion barrels of proved oil reserves as of the end of 2011.
Exxon Mobil (NYSE:XOM) and Lukoil were awarded the rights to this field, in two separate bidding rounds held in 2009. Exxon Mobil has already exceeded the original initial targeted production level of 268,000 barrels of oil per day from West Qurna, with the field producing an average of 417,000 barrels of oil per day in June 2012. Exxon Mobil is targeting production of 2.825 million barrels of oil per day from West Qurna by 2017, but is reportedly considering selling its interests here.
BP (NYSE:BP) was awarded the rights to explore and develop the Rumaila field in 2009. Located in Southern Iraq, this field has estimated proved reserves of 17 billion barrels of oil as of the end of 2011. BP has also exceeded the initial oil production target of 1.173 million barrels per day, with average oil production of 1.279 million barrels per day in June 2012. China National Petroleum Corporation (CNPC) is partnering with BP to help at the Rumaila field.
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Eni (NYSE:E) was awarded the concession at the Zubair field, along with partner Occidental Petroleum (NYSE:OXY). This consortium has also been successful at Zubair, with June 2012 average oil production reported at 225,000 barrels per day, above the initial target of 201,000 barrels per day.
Royal Dutch Shell (NYSE:RDS.A, RDS.B) is Exxon Mobil's partner at the West Qurna field and was also awarded the rights to explore and develop the Majnoon field. This field produced an average of 21,000 barrels of oil per day in June 2012, below the initial targeted production level of 175,000 barrels per day.
The Bottom Line
Iraq has grand ambitions on oil production growth after years of underinvestment by previous governments. Although Iraq's oil field holds great potential, the euphoria over this future exploration and development should be tempered by more realistic perceptions of this expected growth.
At the time of writing, Eric Fox did not own any shares in any company mentioned in this article.