Iraq oil export system desperate for upgrade
Aug 11, 2009
Iraq's oil exports have hit a post-war high, but its failure to attract the huge investment it needs to overhaul crumbling infrastructure will prevent it from becoming one of the world's top oil powers for some time.
The oil sector is dilapidated after years of sanctions and war, and output is unlikely to rise much further in the next three years despite long-term plans to more than double output.
"In the near term, Iraq is constrained in the volume it can export and consume," said Alex Munton, analyst at consultancy Wood Mackenzie. "They maybe could pump another few hundred thousand barrels per day through the northern pipeline. They're not going to get a lot more than that in the next 2-3 years."
Iraq oil exports hit 2.037 million bpd in July, a high since the U.S.-led invasion in 2003. That and higher crude prices have allowed the oil-dependent government to raise the budget.
Northern exports could provide another fillip, but there was little room for more until Iraq expanded southern pipeline and export systems, which could take years, analysts said.
The northern line to Turkey pumped 544,000 bpd of crude in July. It has 700,000 to 900,000 bpd capacity, Munton said.
Crude to fill it could come from Iraq's semi-autonomous Kurdish region. Baghdad allowed Kurdish exports to flow into the line in June, a breakthrough in a long dispute over deals the Kurdish Regional Government (KRG) has signed with foreign firms.
Payment terms have yet to be agreed, but the KRG is targeting a quick rise in exports to 100,000 bpd. It aims to boost regional output to 450,000 bpd by 2011.
The contract feud is rooted in the struggle for control of Iraq's oil wealth, an issue entangled with conflicting visions of the future of the country as a nation state. That has prevented consensus on an oil law to attract the foreign cash needed for reconstruction.
"This political debate ought to happen before the next oil bidding round," said an Iraq oil industry expert, on condition of anonymity. "The oil law is essential in nailing down where power is in Iraq."
Iraq's prime minister and the KRG president had a rare meeting last week and agreed to hold further talks as they tried to bridge their differences.
The International Energy Agency sees political barriers preventing big output gains for at least five years. The IEA saw output falling to around 2.23 million bpd in 2010 before rebounding to around 2.7 million bpd in 2014. Current output was around 2.5 million bpd.
"We may get isolated incidents of higher production from individual fields, but the long-term supply aspirations will remain just that until you get the regulatory framework in place," said David Fyfe, head of the IEA's oil industry and markets division.
Most of Iraq's oil is shipped from the offshore southern Basra terminal. There, rusting subsea pipelines limit the sustainable flow to 1.5 million bpd, Munton said.
Iraq has commissioned early work on a project to add pipelines and mooring facilities at Basra. Without them, Baghdad lacks a route to market for its target output of 6 million bpd.
The success of BP and China's CNPC bid to boost output from Rumaila, Iraq's largest oilfield, depends on this and the speedy overhaul of pipelines and storage.
BP and CNPC won a contract in June to nearly triple Rumaila output to 2.85 million bpd in six years. Rumaila was the only field awarded of six giant fields on offer in Iraq's first oil auction since the war, as big energy firms walked away rather than accept what they saw as Iraq's paltry payment terms.
Once the Rumaila deal is signed, the firms would want to work quickly to recover investment, so output could improve within 18 months, sources said. Fast work could take Iraqi output to 4 million bpd by the middle of the next decade, Munton estimated.
"If BP is to make any success out of it they need to raise output as fast as possible and much faster than in six years," said one senior oil executive at an international oil company. "Every day of delay will erode their return on investment."
Iraq is making other efforts to increase supply. A rapid development plan is underway to restore southern capacity after pressure problems cut 250,000 bpd from output last year.
Engineering and construction deals at some fields could lift supply, although talks on the first have dragged on for months. The deal could boost output from the Nassiriyah oilfield by 100,000 bpd in 18 months.
Iraq plans more drilling to raise output to 3.5 million bpd within three years, although oil executives doubt it has the capacity or cash to do so.
"Just to stay flat requires significant increases in drilling activity," said one executive at a western oil firm. "What they did last year was clearly nowhere near enough."
As part of longer-term plans to boost output, Iraq plans to put giant undeveloped fields up for auction in late November.
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Aug 11, 2009
Iraq's oil exports have hit a post-war high, but its failure to attract the huge investment it needs to overhaul crumbling infrastructure will prevent it from becoming one of the world's top oil powers for some time.
The oil sector is dilapidated after years of sanctions and war, and output is unlikely to rise much further in the next three years despite long-term plans to more than double output.
"In the near term, Iraq is constrained in the volume it can export and consume," said Alex Munton, analyst at consultancy Wood Mackenzie. "They maybe could pump another few hundred thousand barrels per day through the northern pipeline. They're not going to get a lot more than that in the next 2-3 years."
Iraq oil exports hit 2.037 million bpd in July, a high since the U.S.-led invasion in 2003. That and higher crude prices have allowed the oil-dependent government to raise the budget.
Northern exports could provide another fillip, but there was little room for more until Iraq expanded southern pipeline and export systems, which could take years, analysts said.
The northern line to Turkey pumped 544,000 bpd of crude in July. It has 700,000 to 900,000 bpd capacity, Munton said.
Crude to fill it could come from Iraq's semi-autonomous Kurdish region. Baghdad allowed Kurdish exports to flow into the line in June, a breakthrough in a long dispute over deals the Kurdish Regional Government (KRG) has signed with foreign firms.
Payment terms have yet to be agreed, but the KRG is targeting a quick rise in exports to 100,000 bpd. It aims to boost regional output to 450,000 bpd by 2011.
The contract feud is rooted in the struggle for control of Iraq's oil wealth, an issue entangled with conflicting visions of the future of the country as a nation state. That has prevented consensus on an oil law to attract the foreign cash needed for reconstruction.
"This political debate ought to happen before the next oil bidding round," said an Iraq oil industry expert, on condition of anonymity. "The oil law is essential in nailing down where power is in Iraq."
Iraq's prime minister and the KRG president had a rare meeting last week and agreed to hold further talks as they tried to bridge their differences.
The International Energy Agency sees political barriers preventing big output gains for at least five years. The IEA saw output falling to around 2.23 million bpd in 2010 before rebounding to around 2.7 million bpd in 2014. Current output was around 2.5 million bpd.
"We may get isolated incidents of higher production from individual fields, but the long-term supply aspirations will remain just that until you get the regulatory framework in place," said David Fyfe, head of the IEA's oil industry and markets division.
Most of Iraq's oil is shipped from the offshore southern Basra terminal. There, rusting subsea pipelines limit the sustainable flow to 1.5 million bpd, Munton said.
Iraq has commissioned early work on a project to add pipelines and mooring facilities at Basra. Without them, Baghdad lacks a route to market for its target output of 6 million bpd.
The success of BP and China's CNPC bid to boost output from Rumaila, Iraq's largest oilfield, depends on this and the speedy overhaul of pipelines and storage.
BP and CNPC won a contract in June to nearly triple Rumaila output to 2.85 million bpd in six years. Rumaila was the only field awarded of six giant fields on offer in Iraq's first oil auction since the war, as big energy firms walked away rather than accept what they saw as Iraq's paltry payment terms.
Once the Rumaila deal is signed, the firms would want to work quickly to recover investment, so output could improve within 18 months, sources said. Fast work could take Iraqi output to 4 million bpd by the middle of the next decade, Munton estimated.
"If BP is to make any success out of it they need to raise output as fast as possible and much faster than in six years," said one senior oil executive at an international oil company. "Every day of delay will erode their return on investment."
Iraq is making other efforts to increase supply. A rapid development plan is underway to restore southern capacity after pressure problems cut 250,000 bpd from output last year.
Engineering and construction deals at some fields could lift supply, although talks on the first have dragged on for months. The deal could boost output from the Nassiriyah oilfield by 100,000 bpd in 18 months.
Iraq plans more drilling to raise output to 3.5 million bpd within three years, although oil executives doubt it has the capacity or cash to do so.
"Just to stay flat requires significant increases in drilling activity," said one executive at a western oil firm. "What they did last year was clearly nowhere near enough."
As part of longer-term plans to boost output, Iraq plans to put giant undeveloped fields up for auction in late November.
Reply With Quote
Aug 11, 2009
Iraq's oil exports have hit a post-war high, but its failure to attract the huge investment it needs to overhaul crumbling infrastructure will prevent it from becoming one of the world's top oil powers for some time.
The oil sector is dilapidated after years of sanctions and war, and output is unlikely to rise much further in the next three years despite long-term plans to more than double output.
"In the near term, Iraq is constrained in the volume it can export and consume," said Alex Munton, analyst at consultancy Wood Mackenzie. "They maybe could pump another few hundred thousand barrels per day through the northern pipeline. They're not going to get a lot more than that in the next 2-3 years."
Iraq oil exports hit 2.037 million bpd in July, a high since the U.S.-led invasion in 2003. That and higher crude prices have allowed the oil-dependent government to raise the budget.
Northern exports could provide another fillip, but there was little room for more until Iraq expanded southern pipeline and export systems, which could take years, analysts said.
The northern line to Turkey pumped 544,000 bpd of crude in July. It has 700,000 to 900,000 bpd capacity, Munton said.
Crude to fill it could come from Iraq's semi-autonomous Kurdish region. Baghdad allowed Kurdish exports to flow into the line in June, a breakthrough in a long dispute over deals the Kurdish Regional Government (KRG) has signed with foreign firms.
Payment terms have yet to be agreed, but the KRG is targeting a quick rise in exports to 100,000 bpd. It aims to boost regional output to 450,000 bpd by 2011.
The contract feud is rooted in the struggle for control of Iraq's oil wealth, an issue entangled with conflicting visions of the future of the country as a nation state. That has prevented consensus on an oil law to attract the foreign cash needed for reconstruction.
"This political debate ought to happen before the next oil bidding round," said an Iraq oil industry expert, on condition of anonymity. "The oil law is essential in nailing down where power is in Iraq."
Iraq's prime minister and the KRG president had a rare meeting last week and agreed to hold further talks as they tried to bridge their differences.
The International Energy Agency sees political barriers preventing big output gains for at least five years. The IEA saw output falling to around 2.23 million bpd in 2010 before rebounding to around 2.7 million bpd in 2014. Current output was around 2.5 million bpd.
"We may get isolated incidents of higher production from individual fields, but the long-term supply aspirations will remain just that until you get the regulatory framework in place," said David Fyfe, head of the IEA's oil industry and markets division.
Most of Iraq's oil is shipped from the offshore southern Basra terminal. There, rusting subsea pipelines limit the sustainable flow to 1.5 million bpd, Munton said.
Iraq has commissioned early work on a project to add pipelines and mooring facilities at Basra. Without them, Baghdad lacks a route to market for its target output of 6 million bpd.
The success of BP and China's CNPC bid to boost output from Rumaila, Iraq's largest oilfield, depends on this and the speedy overhaul of pipelines and storage.
BP and CNPC won a contract in June to nearly triple Rumaila output to 2.85 million bpd in six years. Rumaila was the only field awarded of six giant fields on offer in Iraq's first oil auction since the war, as big energy firms walked away rather than accept what they saw as Iraq's paltry payment terms.
Once the Rumaila deal is signed, the firms would want to work quickly to recover investment, so output could improve within 18 months, sources said. Fast work could take Iraqi output to 4 million bpd by the middle of the next decade, Munton estimated.
"If BP is to make any success out of it they need to raise output as fast as possible and much faster than in six years," said one senior oil executive at an international oil company. "Every day of delay will erode their return on investment."
Iraq is making other efforts to increase supply. A rapid development plan is underway to restore southern capacity after pressure problems cut 250,000 bpd from output last year.
Engineering and construction deals at some fields could lift supply, although talks on the first have dragged on for months. The deal could boost output from the Nassiriyah oilfield by 100,000 bpd in 18 months.
Iraq plans more drilling to raise output to 3.5 million bpd within three years, although oil executives doubt it has the capacity or cash to do so.
"Just to stay flat requires significant increases in drilling activity," said one executive at a western oil firm. "What they did last year was clearly nowhere near enough."
As part of longer-term plans to boost output, Iraq plans to put giant undeveloped fields up for auction in late November.
Reply With Quote
Aug 11, 2009
Iraq's oil exports have hit a post-war high, but its failure to attract the huge investment it needs to overhaul crumbling infrastructure will prevent it from becoming one of the world's top oil powers for some time.
The oil sector is dilapidated after years of sanctions and war, and output is unlikely to rise much further in the next three years despite long-term plans to more than double output.
"In the near term, Iraq is constrained in the volume it can export and consume," said Alex Munton, analyst at consultancy Wood Mackenzie. "They maybe could pump another few hundred thousand barrels per day through the northern pipeline. They're not going to get a lot more than that in the next 2-3 years."
Iraq oil exports hit 2.037 million bpd in July, a high since the U.S.-led invasion in 2003. That and higher crude prices have allowed the oil-dependent government to raise the budget.
Northern exports could provide another fillip, but there was little room for more until Iraq expanded southern pipeline and export systems, which could take years, analysts said.
The northern line to Turkey pumped 544,000 bpd of crude in July. It has 700,000 to 900,000 bpd capacity, Munton said.
Crude to fill it could come from Iraq's semi-autonomous Kurdish region. Baghdad allowed Kurdish exports to flow into the line in June, a breakthrough in a long dispute over deals the Kurdish Regional Government (KRG) has signed with foreign firms.
Payment terms have yet to be agreed, but the KRG is targeting a quick rise in exports to 100,000 bpd. It aims to boost regional output to 450,000 bpd by 2011.
The contract feud is rooted in the struggle for control of Iraq's oil wealth, an issue entangled with conflicting visions of the future of the country as a nation state. That has prevented consensus on an oil law to attract the foreign cash needed for reconstruction.
"This political debate ought to happen before the next oil bidding round," said an Iraq oil industry expert, on condition of anonymity. "The oil law is essential in nailing down where power is in Iraq."
Iraq's prime minister and the KRG president had a rare meeting last week and agreed to hold further talks as they tried to bridge their differences.
The International Energy Agency sees political barriers preventing big output gains for at least five years. The IEA saw output falling to around 2.23 million bpd in 2010 before rebounding to around 2.7 million bpd in 2014. Current output was around 2.5 million bpd.
"We may get isolated incidents of higher production from individual fields, but the long-term supply aspirations will remain just that until you get the regulatory framework in place," said David Fyfe, head of the IEA's oil industry and markets division.
Most of Iraq's oil is shipped from the offshore southern Basra terminal. There, rusting subsea pipelines limit the sustainable flow to 1.5 million bpd, Munton said.
Iraq has commissioned early work on a project to add pipelines and mooring facilities at Basra. Without them, Baghdad lacks a route to market for its target output of 6 million bpd.
The success of BP and China's CNPC bid to boost output from Rumaila, Iraq's largest oilfield, depends on this and the speedy overhaul of pipelines and storage.
BP and CNPC won a contract in June to nearly triple Rumaila output to 2.85 million bpd in six years. Rumaila was the only field awarded of six giant fields on offer in Iraq's first oil auction since the war, as big energy firms walked away rather than accept what they saw as Iraq's paltry payment terms.
Once the Rumaila deal is signed, the firms would want to work quickly to recover investment, so output could improve within 18 months, sources said. Fast work could take Iraqi output to 4 million bpd by the middle of the next decade, Munton estimated.
"If BP is to make any success out of it they need to raise output as fast as possible and much faster than in six years," said one senior oil executive at an international oil company. "Every day of delay will erode their return on investment."
Iraq is making other efforts to increase supply. A rapid development plan is underway to restore southern capacity after pressure problems cut 250,000 bpd from output last year.
Engineering and construction deals at some fields could lift supply, although talks on the first have dragged on for months. The deal could boost output from the Nassiriyah oilfield by 100,000 bpd in 18 months.
Iraq plans more drilling to raise output to 3.5 million bpd within three years, although oil executives doubt it has the capacity or cash to do so.
"Just to stay flat requires significant increases in drilling activity," said one executive at a western oil firm. "What they did last year was clearly nowhere near enough."
As part of longer-term plans to boost output, Iraq plans to put giant undeveloped fields up for auction in late November.
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