Iraq confident of fresh hope for oil exports

Iraq expects oil exports to rise by about 300,000 barrels per day (bpd) daily by January, when a new government is elected with authority to decide on foreign involvement in the sector, the head of Iraq's Energy Council said recently. Ahmad Chalabi, who has emerged as a key player in a transition government formed earlier this year despite falling out with Washington, said he still favoured giving priority to the US and British firms in developing Iraq's oil reserves, the world's third-largest after Saudi Arabia and Canada.

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By  Jyotsna Ravishankar Published  November 1, 2005

Iraq expects oil exports to rise by about 300,000 barrels per day (bpd) daily by January, when a new government is elected with authority to decide on foreign involvement in the sector, the head of Iraq's Energy Council said recently. Ahmad Chalabi, who has emerged as a key player in a transition government formed earlier this year despite falling out with Washington, said he still favoured giving priority to the US and British firms in developing Iraq's oil reserves, the world's third-largest after Saudi Arabia and Canada. “We expect 1.8 million bpd by January,” he said. Although targets to raise output have been regularly missed since the invasion, Chalabi said projects to restore overall oil facilities were under way, and security had been raised to guard against sabotage in the north. “We are improving security and accelerating investment in the oil sector between now and the end of the year. There is also a boost to investment in the 2006 budget,” said Chalabi, who is also the deputy prime minister. Jason Schenker, a US economist studying the Iraqi markets, told Oil&Gas Middle East that a target of 300,000 bpd was definitely aggressive, though not impossible. “If there is political cohesiveness in the region with the new government, higher exports from Iraq are definitely in the cards, ” he said. Schenker also attributed his optimism to the fact that the insurgency has not greatly affected the energy infrastructure. He echoed Chalabi’s views that the country’s energy sector can progress rapidly if it is not politicised. Chalabi has previously said that Iraq’s political leaders realised that they could not afford to politicise the oil industry, and that production decisions had to involve the central government, although regional governments would autonomously negotiate with foreign companies. “The oil sector will stay out of political disputes, (because) Iraqi officials recognise that it is the lifeline of the economy. The cabinet has already decided to allow foreign majority share ownership of Iraqi banks and foreign investment and ownership in downstream oil, including refineries,” he said. Political instability and the violence have delayed projects to rebuild Iraq's oil industry after the 2003 invasion that removed Saddam Hussein from power. A new parliament is due to be elected in January after a referendum on a federal constitution, which dilutes authority over the oil sector away from the central government and to the provinces. The constitution raised concern that Iraqi oil deals will become even more difficult to negotiate. Majors such as Exxon Mobil, Chevron, BP, and Shell had prepared for an international scramble for Iraq's oilfields before the war. They have kept their links with the Iraqi oil ministry despite the chaos following the collapse of the Iraqi state. Problems in production, including power cuts and attacks on the northern export pipeline, have limited Iraq's exports to 1.5 million bpd, since the 2003 war. Pre-war production was running at 2.4-2.8 million bpd compared with more than 3 million bpd before economic sanctions were imposed on Iraq in 1990. According to the Energy Information Administration, Iraq contains 115 billion barrels of proven oil reserves concentrated overwhelmingly (65% or more) in southern Iraq. Estimates of Iraq's oil reserves and resources vary widely, however, given that only about 10% of the country has been explored.

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