EIA sees no major boost

Filed on January 11, 2006

KUWAIT CITY — Iraq has vast hydrocarbon potential that could rival major producers such as Saudi Arabia and Russia, but US government analysts are predicting that Iraqi oil production development will remain thwarted for years to come.

Its enormous reserves of an estimated 115 billion barrels of proven crude are the world’s third largest after those of the Saudi Kingdom and Canada.

As of December 2005, Iraqi net oil production was averaging a modest 1.9 million barrels per day (bpd), according to the latest country report on Iraq compiled by the US government’s Energy Information Agency (EIA).

This is well below production levels of an estimated 2.3-million bpd in January 2003 just before the US-led military operation to bring down the Saddam Hussein regime.

The December number is also well below the near 3.5-million-bpd production level prior to Iraq’s 1990 invasion and seven-month occupation of Kuwait that led to the 1991 Gulf War.

“Most analysts believe that there will be no major additions to Iraqi production capacity for at least 2-3 years, with Shell’s vice-president recently stating that any auction of Iraqi’s oilfields was unlikely before 2007,” said the EIA report released in late December 2005 and carried on its web site.

Despite its attractive potential for development — only 17 of the 80 fields discovered in Iraq have been developed — a number of reasons have been behind Iraq’s slowness to turn around its post-war oil industry.

Political instability, violence, and the sabotage of oil industry pipelines and infrastructure have been main factors. The 2003 war itself did little damage to the infrastructure, but looting and sabotage in the aftermath accounted for 80 per cent of the destruction.

Between April 2003 and January 5, 2006 there were 290 recorded attacks on Iraq’s hydrocarbon and energy infrastructure including the nation’s 4,350-mile-long pipeline system and 11,000-mile-long power grid according to the US-based Institute for the Analysis of Global Security (IAGS), an independent organisation that monitors energy and security issues.

Sabotage, bombings, and looting along Iraq’s biggest export line, the duel 600-mile Kirkuk-Ceyhan pipes which can optimally transport 1.6-million bpd of two kinds of crude, have forced it to operate only sporadically. Shutdowns and property damage resulting from the attacks have cost Iraq billions of dollars in lost oil export revenues and repair costs.

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