Iraq produced 3.2 million barrels per day (mmbpd) in June 2013, according to the recent OPEC report. As Iraq has not been allotted any fixed quota in OPEC production, Iraq continues on its own course of action to develop numerous new oil fields to threaten the control OPEC has over the world supply of oil.

Figure 1: OPEC Production of Oil in June 2013 (000 bbls)

oil

Iraq has the fifth largest crude oil proven reserves in the world at 141 billion barrels (bbls) as of January 1, 2013. This means that if Iraq is able to overcome its geopolitical issues and civil unrest, it can secure its position as one of the top powerful oil nations.

Figure 3: Iraq’s Historical Production of Crude Oil (000 bbls)

Source: OPEC
Source: OPEC

Oil Reserves in Iraq

The majority of oil reserves in Iraq lie along the eastern belt of Iraq. Iraq has five major oil fields which constitute 60 percent of the total country’s proven oil reserves. Much of the significant reserves lie in disputed areas with serious civil unrest. The longstanding squabble over the rights to these lucrative oil reserves has meant that the reserves lie untouched. The area under the Kurdistan Regional Government (KRD) contains inaccessible reserves of about 4 billion bbls. However, this region is now being actively explored, and the KRG stated that this region could contain 45 billion barrels of unproven oil resources, as reported by the US Energy Information Administration (EIA).

Iraq has aggressive plans to develop its oil fields over the next five years and is implementing a multi phase strategy to increase its production. Iraqi Ministry of Oil also signed long-term contracts between November 2008 and May 2010 with international oil companies to expand their activities in Iraq.

‘Under the first phase, companies bid to further develop giant oil fields that were already producing. Phase two contracts were signed to develop oil fields that were already explored but not fully developed or producing commercially. Together, contracts for both phases cover oil fields with proven reserves of over 60 billion barrels. If these fields were developed as initially planned, they would increase total Iraqi production capacity to almost 12 million bbl/d, or about 9 million bbl/d above 2012 production levels… Iraq has since held a third bidding round for natural gas fields, and a fourth round (with few bids submitted) for fields that contain predominantly crude oil. A fifth round has been scheduled in 2013 for the development of the 4-billion-barrel Nasiriya oil field in Thi-Qar province, together with the construction and operation of a new 300,000-bbl/d refinery,’ says the EIA.

Table 1: Phases of Iraq’s Oil Development Plans

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Source: Energy Information Administration, 2013
Source: Energy Information Administration, 2013

The threat of political unrest

Despite Iraq’s ambitious plans, the threat of political unrest is a major one and cannot be ignored. Furthermore, much infrastructural and other investment is required to achieve these goals. According to Iraq’s Deputy Prime Minister for Energy, capital expenditures of USD 30 billion are required annually for energy infrastructure for Iraq to meet its production targets.

Given the size of this investment, OPEC and the rest of the world are not very convinced that Iraq’s development plans will materialize even in the next decade. However, if Iraq were to overcome these hurdles, the country could completely alter the arena of global oil supply, which currently feels threatened by the limited OPEC spare capacity available.