Iraq hones in on oil production target

A ramp-up in Iraqi oil exports to a record high last month brings closer its target of increasing its daily volumes by more than a million barrels in 2014.

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A ramp-up in Iraqi oil exports to a record high last month brings it closer to its target of increasing daily volumes by more than a million barrels this year.

Iraq exported 2.8 million barrels per day (bpd) last month, up from 2.2 million in January, said Hussein Shahristani, the deputy prime minister for energy.

The government is targeting exports of 3.4 million bpd in 2014 including output from the semi-autonomous Kurdistan region, part of an overall target of pumping 9 million bpd by 2020.

Increasing exports this year will require nearly doubling payments to international oil companies and, in the long term, costly investments to diversify the nation’s export infrastructure, which relies on southern sea terminals and an often-shut pipeline to Turkey.

The government, which grants international oil companies service contracts rather than wholesale concessions, estimates it will pay foreign partners US$12.5 billion this year, compared to $7bn in 2013. Capital expenditures for oil and gas, including the payments to BP, Royal Dutch Shell and other supermajors, are expected to total $17.5bn, said Thamir Ghadban, the chairman of Iraq’s Prime Minister’s Advisors Commission and the former interim oil minister.

Iraq needs to focus on increasing fuel supplies to the local market to cut costs, he said.

“We are paying quite a lot from our treasury to pay for gas and gas oil for local consumption,” he said at an industry conference this week in Dubai. “We should do our best to expand our refining capacity and expand our gas production.”

The government has also set a timetable for building two pipelines to transport oil from Basra to the north, then onwards to the Jordanian seaport of Aqaba – an $18 million project.

The first would be a 676-kilometre pipeline capable of transporting 2.25 million bpd from Basra to Haditha in Iraq’s north-west. Tenders are expected this year for the 142-centimetre diameter pipeline, pumping stations and storage facilities.

Iraq and Jordan are also preparing to tender the pipeline connecting Iraqi oil to export facilities in Aqaba, with a deadline for commercial bids in July and financial close expected by the end of the year.

“Diversifying crude routes is always a good strategic move,” said Shwan Zulal of Carduchi, a Kurdistan-focused consultancy. “Given the current uncertainty with the Kurdish Regional Government and significant security issues with the Kirkuk-Ceyhan [Turkey] pipeline, the project is more relevant, although very costly.”

ayee@thenational.ae