Iraq to fight for greater share of OPEC rations
October 16, 2010
AT ITS most modest, Iraq presents its plan as a "doubling of output in a few years". Stated more boldly, however, regional and global security and economic imperatives kick in.
Baghdad wants to overtake Tehran, to its east, as a major producer before knocking over the world's No.1 producer - Riyadh, to its south. Jealous of its historic standing as the world's biggest petrol station, Saudi Arabia has already revealed plans to push its own oil capacity - about 11 million barrels a day - beyond the 12 million barrels a day mark.
The Iraq government's chief adviser on energy policy, Thamir Ghadhban, concedes that such a huge industry expansion has never been attempted in the past, certainly not in the timetable envisaged by Baghdad or in such an uncertain political, administrative and security environment.
He skates over the embarrassing fact that seven years after the US-led invasion, crude oil production is less than it was during the last days of Saddam - 2.32 million barrels a day now, compared with 2.5 million back then.
Still to be resolved are the terms on which Iraq returns to the ranks of a global powerhouse that it helped to form 40 years ago - the Organisation of the Petroleum Exporting Countries.
Calculating production quotas for member countries - using a formula based on total reserves and production capacity - OPEC works to keep oil prices in a band with which all can live. The objective is to stay the hand of individual producers who otherwise might flood the market, forcing a price cut that would become a self-fulfilling prophecy, because other producers would pump more oil to maintain their earnings, which would force prices even lower.
The real-politic here is that Iraq's planned mega-barrels cannot be sold into the market unless capitals from Moscow to Caracas are prepared to take either a production or a revenue hit.
Iraq's pre-Gulf War quota was 3.1 million barrels a day - roughly the amount by which OPEC forecasts demand will increase by 2015. Currently producing 2.5 million barrels a day, but with the world's third biggest reserves of oil, Baghdad wants to push to 12 million barrels - all in a matter of seven years.
Restoring Iraq's quota would give to it all of OPEC's forecasted market growth, requiring other producers to forego quota increases. On top of that, Iraq's plans for expansion would position it to dump three times the OPEC growth forecast into the market. Something has to give.
Advanced economies might welcome a market awash with low-priced Iraqi oil. No doubt they would call it ''price moderation'', but other oil producers might see it as something else - perhaps a pricing war.
Oil politics were the root of Saddam Hussein's back-to-back wars - his decade-long conflict with Iran and his short-lived but costly invasion of Kuwait - and at a security conference in Bahrain last year the Iraqi Foreign Minister, Hoshyar Zebari, rattled Baghdad's sabre: "Iraq is a powerhouse in the region and it will regain its place, its rightful place [in OPEC]."
That insistent tone was present as the Oil Minister, Hussein al-Shahristani, revealed an outline of Baghdad's thinking to the Herald. "All the countries realise Iraq has been deprived of its fair share over many years and [that we] need revenues to rebuild our economy and infrastructure," he said.
http://www.brisbanetimes.com.au/world/iraq-to-fight-for-greater-share-of-opec-rations-20101015-16nnj.html?
October 16, 2010
AT ITS most modest, Iraq presents its plan as a "doubling of output in a few years". Stated more boldly, however, regional and global security and economic imperatives kick in.
Baghdad wants to overtake Tehran, to its east, as a major producer before knocking over the world's No.1 producer - Riyadh, to its south. Jealous of its historic standing as the world's biggest petrol station, Saudi Arabia has already revealed plans to push its own oil capacity - about 11 million barrels a day - beyond the 12 million barrels a day mark.
The Iraq government's chief adviser on energy policy, Thamir Ghadhban, concedes that such a huge industry expansion has never been attempted in the past, certainly not in the timetable envisaged by Baghdad or in such an uncertain political, administrative and security environment.
He skates over the embarrassing fact that seven years after the US-led invasion, crude oil production is less than it was during the last days of Saddam - 2.32 million barrels a day now, compared with 2.5 million back then.
Still to be resolved are the terms on which Iraq returns to the ranks of a global powerhouse that it helped to form 40 years ago - the Organisation of the Petroleum Exporting Countries.
Calculating production quotas for member countries - using a formula based on total reserves and production capacity - OPEC works to keep oil prices in a band with which all can live. The objective is to stay the hand of individual producers who otherwise might flood the market, forcing a price cut that would become a self-fulfilling prophecy, because other producers would pump more oil to maintain their earnings, which would force prices even lower.
The real-politic here is that Iraq's planned mega-barrels cannot be sold into the market unless capitals from Moscow to Caracas are prepared to take either a production or a revenue hit.
Iraq's pre-Gulf War quota was 3.1 million barrels a day - roughly the amount by which OPEC forecasts demand will increase by 2015. Currently producing 2.5 million barrels a day, but with the world's third biggest reserves of oil, Baghdad wants to push to 12 million barrels - all in a matter of seven years.
Restoring Iraq's quota would give to it all of OPEC's forecasted market growth, requiring other producers to forego quota increases. On top of that, Iraq's plans for expansion would position it to dump three times the OPEC growth forecast into the market. Something has to give.
Advanced economies might welcome a market awash with low-priced Iraqi oil. No doubt they would call it ''price moderation'', but other oil producers might see it as something else - perhaps a pricing war.
Oil politics were the root of Saddam Hussein's back-to-back wars - his decade-long conflict with Iran and his short-lived but costly invasion of Kuwait - and at a security conference in Bahrain last year the Iraqi Foreign Minister, Hoshyar Zebari, rattled Baghdad's sabre: "Iraq is a powerhouse in the region and it will regain its place, its rightful place [in OPEC]."
That insistent tone was present as the Oil Minister, Hussein al-Shahristani, revealed an outline of Baghdad's thinking to the Herald. "All the countries realise Iraq has been deprived of its fair share over many years and [that we] need revenues to rebuild our economy and infrastructure," he said.
http://www.brisbanetimes.com.au/world/iraq-to-fight-for-greater-share-of-opec-rations-20101015-16nnj.html?