Iraq’s oil ambition looks fragile

15 September 2011 By Una Galani, Christopher Swann Follow @ugalani

The oil-rich country is on the verge of lowering its official output targets and exports have been disrupted. Infrastructure is a major problem. But the politics at home and away mean Iraq’s path to becoming a global oil giant again is set to get longer and tougher.

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Iraq’s oil minister said on Sept. 11 that a production capacity target of 8.0-8.5 million barrel per day for contracts signed with international oil companies was “more suitable” than the current target of 12 million bpd.

Abdul-Kareem Luaibi said the plateau production period for a series of deals signed with oil majors could be extended to 13 or 14 years rather than the current seven years, but no final decision has been made yet.

Oil majors that have signed contracts with Baghdad are paid per barrel. Any revision to Iraq’s output targets could result in companies generating lower returns over the short term.

On the same day, Iraq’s semi-autonomous northern Kurdish region halted exports. The region had been exporting between 100,000 and 150,000 barrels per day before the interruption. No reason was given at the time for the suspension.

Iraq is estimated to have the world’s second-largest oil reserves, with reserves recently revised upward from 115 to 143 billion barrels, based on new geological surveys, according to the International Monetary Fund.

On Sept. 7, Vallares agreed a $4 billion tie-up with Genel Energy, the largest oil producer in Kurdistan Iraq. The London-listed investment vehicle was founded by ex-BP chief executive Tony Hayward and financier Nat Rothschild.

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