IEA optimistic about future of Iraq oil industry

The International Energy Agency predicted Tuesday that Iraq will consolidate its position as a global oil power – allowing it to rebuild the economy of a nation ravaged by war and decades of Saddam Hussein’s autocratic rule.

The leading global energy monitor reported that Iraq’s annual revenues from energy exports could double to an average of $200 billion annually over the next 20 years. That optimistic scenario would make Iraq’s economy the same size as that of Saudi Arabia now by 2035.

“I am optimistic about Iraq and Iraq’s contribution to the global oil markets and them being able to reconstruct their country,” Birol said in an interview with The Associated Press. “So a new, modern and prosperous country is set to emerge in the Middle East as a result of oil and gas revenues.”

The IEA is a policy adviser to 28 member countries, mostly industrialized oil consumers. The Paris-based group’s predictions are important because they are seen as key benchmarks for energy markets.

In the group’s “central scenario,” Iraq’s oil exports are projected to grow from 3 million barrels a day now to 6.1 million barrels a day in 2020 and 8.3 million barrels a day in 2035. Iraq is already the world’s third-largest oil exporter.

But the IEA said Iraq needed to sort out internal issues in order for its predictions to come true. Disputes between Iraq’s central government and some regional governments regarding oil contracts must be resolved.

Among the most troublesome are the contracts awarded by the Kurdistan regional authorities for access to its rich oil fields in the north of Iraq. Federal officials in Baghdad contest those contracts.

At the same time, Iraq must complete projects to ensure water is supplied to the oil fields to assist in the extraction process. More oil export facilities also need to be completed.

Increased oil production in Iraq is also crucial for international markets, as Iraq is expected to account for nearly half of the expected growth in global oil output in the current decade, the IEA said.

“Iraq by far makes the largest contribution to global oil production growth,” Birol said. “If Iraqi production grows very slowly … this would put upward pressure on prices.”

A more pessimistic IEA forecast sees Iraqi oil output rising to just 4 million barrels a day in 2020 and to 5.3 billion barrels in 2035.

Should the low projection prove to be the more accurate, the IEA said oil prices per barrel could reach nearly $140 in real terms in 2035, nearly $15 a barrel more than under the central scenario.

The report also stressed that Iraq had to meet its own rising electricity demand to avoid the prolonged power cuts still affecting the country. Moving from mostly oil-fueled power generation to gas-fired output would limit domestic oil demand and maximize export revenues.

“Turning the country into a global energy powerhouse will not be an easy task,” the report said, “but this is a prize within the reach of the people of Iraq.”

 AP