Iraq will make the largest contribution to global oil supply growth with production on track to more than double to 6.1 million barrels per day by 2020, the International Energy Agency said in an in-depth report released this week.
Iraq has contracts already in place with international companies to increase crude production capacity and stands to gain almost $5 trillion in revenues from oil exports through 2035, said IEA.
The Iraq Energy Outlook forecast the country's capacity would surpass 8 million barrels a day by 2035. Iraq pumped 3.1 million barrels a day in August, up from 2.4 million barrels a day just two years ago.
The outlook provided by the IEA isn't all sunshine and rainbows. How this plays out will be highly dependent on the speed at which impediments to investment are removed, market conditions and Iraq's ability to maintain political stability and develop its workforce, the IEA said. It also will require substantial investment in oil infrastructure, roads and the country's decrepit electricity grid.
Iraq's electricity grid is especially problematic. Prolonged power outages occur daily in many parts of the country. The IEA estimates Iraq needs 70 percent more net power generation capacity to meet demand. The country will have to install 70 gigawatts of generation capacity and move away from a predominantly oil-fired power mix to efficient gas-fired generation, the IEA said.
This means, Iraq will have to invest a lot into the energy sector -- an average of $25 billion per year through 2020 -- if it hopes to meet its potential.
If Iraq doesn't make this transition, the country would lose around $520 billion in oil export revenues and domestic oil demand would be more than 1 million barrels per day higher in 2035.
International oil markets also would likely tighten and crude prices could rise to $140 a barrel by 2035, if there are major delays in the development of Iraq's reserves, the IEA said.
A little history
Iraq's first oil auction in nearly 40 years didn't quite meet the lofty expectations that had been swirling around it. The July 2009 auction, which offered up six oil and two gas fields, was only able to secure one contract with BP and its consortium partner China National Petroleum Co., to develop the Rumaila field in southern Iraq.
In all, 22 companies placed bids at the auction. BP was the only firm willing to lower its per barrel fee to $2, the maximum amount Iraq's oil ministry said it would pay.
In another auction several months later, several more contracts would be awarded, including to Royal Dutch Shell and Petronas of Malaysia to develop the Majnoon oil field, one of the world's largest remaining untapped oil fields, and another to China and its minority consortium partner Total.
Photo: Oil barrels by Flickr user XcBiker, CC 2.0