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Page added on October 9, 2012
Will Iraq’s energy boom postpone peak oil yet again?
Well, here is a shocker for the peak oil camp.
Iraq’s oil output will more than double from 2.6 million to 6 million barrels a day (b/d) by the end of the decade. This is 45pc of world oil supply growth over these years.
It will reach 8 million b/d by 2035. By then, Iraq will have overtaken Russia to become the world’s second biggest oil exporter – supplying China with 2 million b/d in a modern marine revival of the silk trade – and earning $200 billion a year in revenues.
It will also be a major gas exporter.
That is the conclusion of a special report by the International Energy Agency on Iraq released this morning.
As a signed-up member of the cheap peak oil club – not quite the same as peak oil – I am watching this with great interests.
As the IEA says, this will require $530 billion of new investment. “The obstacles are formidable: political, logistical, legal, regulatory, financial, lack of security and insufficient skilled labour,” it said.
Good luck to the Iraqis. Let us hope that they – with the help of BP, Shell, Exxon, et al – can pull it off.
They would eclipse Iran and transform the strategic balance of power within the Middle East – hopefully for the better, though one never knows.
But right now they have a civil war on one border, a nuclearist, stone-hurling, clerico-Fascist with hyperinflation on a second border, and a near breakdown in relations with Kurdistan inside the country. They have not even passed a hydrocarbon law.
The IEA has long warned that the world faces a horrendous energy crunch before long as the industrial revolutions of Asia come of age, with China alone adding 20 million cars a year already.
Iraq may help to plug part of the gap – with great help from North American shale oil and gas, and perhaps Chinese shale in the future – but I doubt that it will alleviate the full strain.
For now, note that Brent crude is trading at $113 even though Europe is stuck in slump, much of Asia has slowed sharply and is in a quasi-recession, and the US is so weak that the Fed has just launched QE3.
The implication is that the equilibrium price of Brent in a healthy global economy is likely to be near $150, and perhaps $200 in the late phase of a global expansion (assuming that such a shock does not kill the boom first).
Many readers on this thread are very well informed on the energy markets, so I leave it to you to parse the details of this IEA report while I return to Greece’s love affair with Angela Merkel.
Will Iraq actually deliver?
12 Comments on "Will Iraq’s energy boom postpone peak oil yet again?"
Plantagenet on Tue, 9th Oct 2012 3:37 pm
How ironic it would be if George Bush’s unnecessary war in Iraq turned out to be the necessary key to freeing Iraq from Saddam Hussein and ending sanctions, thereby allowing Iraq to become the linchpin oil producer for the world in the next few decades.
Poordogabone on Tue, 9th Oct 2012 6:15 pm
Or we could have lifted the sanctions (there was no weapons of mass destruction), spare us the cost of a war and let Iraq trade its oil in Euros or whatever. There would be plenty more oil on the market right now and much less enemies or antagonized people to worry about.
george on Tue, 9th Oct 2012 6:47 pm
that has to be the funniest IEA report in the last five years
GregT on Tue, 9th Oct 2012 6:49 pm
I’m sure that the average Iraqi is pleased as punch that ol’ Georgie liberated their country.
Maybe now they can enjoy the same standard of living that the average American can and consume as much oil in the process. Which, by the way, turns out to be very close to their entire current oil production!
Nuclear on Tue, 9th Oct 2012 7:13 pm
They are kidding. More vehicles moving to Electric, Plugin, Natgas, Ethanol will reduce the market for Oil.
By 2035, World may not even pump 80 million b/d.
Keith_McClary on Tue, 9th Oct 2012 7:47 pm
“Delay could cost $3 trillion in lost national wealth for Iraq and bring difficult times to international oil markets.”
because
“International oil markets tighten, characterised by higher and, in all probability, more volatile prices. ”
High prices are bad for exporters?
Plantagenet on Tue, 9th Oct 2012 7:50 pm
@poordog. You are having a fantasy—there was no chance the UN would drop its sanctions on Saddam after he invaded Kuwait, used chemical WMDs on the Kurds inside Iraq in a genocidal campaign, and funded terrorist bombers in Israel and elsewhere.
Newfie on Tue, 9th Oct 2012 11:05 pm
As Iraqi oil production rises, it declines in most of the rest of world. Duh.
BillT on Wed, 10th Oct 2012 12:34 am
Well, any article that uses ‘will’ so often in its first paragraph is a joke.
Another piece of propaganda by Big Petro to make you feel good and buy a new SUV.
“…will more than double…”
“…will reach 8 million b/d by 2035…”
“…will have overtaken Russia …”
“…will also be a major gas exporter…
As for the rest … yes, there will always be oil that will be accessible. Why? Because the economy that supports oil recovery and refinement is going to die long before the last barrel is pumped. When the system to supply the billions needed to get this oil disappears, so will the oil. We are at the peak in many ways and are on the way down the far side. No George Jetson future ahead. More like Barney Rubble’s without the dinosaurs.
DC on Wed, 10th Oct 2012 1:14 pm
Well, lets assume this fantasy were to become a ‘reality; (lol). What would that mean in practical terms? Well, oil, as the authors of this piece dont seem to be aware is a *finite* resource. Doubling the production would mean that the peak (Iraqs) would just arrive that much sooner. Besides, there was nothing wrong with Iraqs production levels before the US attack. They certainly suffered after it. In any event, increasing production something is all well and fine, if were talking about a renewable resource thats being harvested at a lower than replacement rate. Im pretty sure OIL however, does not into that category.
FarQ3 on Wed, 10th Oct 2012 3:42 pm
Well …. just a few months back they were saying it would be 12mbbls/d … what happened to the other 4?
James A. Hellams on Thu, 11th Oct 2012 8:23 am
This report lacks three very critical components.
The first component is the total number of barrels of oil they claim Iraq to have.
The second component is the total number of barrels of oil, expressed in billions, that the world consumes in one year.
The third component is the total EROEI for the oil to be recovered, shipped, and refined.
The above components are missing, so you can not realistically compare and evaluate their claims; and separate the hype from the hard realities.