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Iraqi Oil In Context: 60% Of OPEC Growth Expectations

Tyler Durden's picture




 

While Iraqi crude represents about 4.4% of world production, or around 3.4 mmbd (5th largest in the world);

 

enabling investors to shrug at any fears that ISIS will spread to the South and interrupt this supply (since it will be 'contained'); what many do not comprehend is that in such a tight oil market as we currently have, Goldman warns that as much as 60% of OPEC’s expected capacity growth over the next five years to come from Iraq.

 

Production losses so far have been fairly small, and have only been felt domestically. However, the larger impact of the conflict potentially lies in the medium to long term.

Goldman explains the long-term implications for Iraq’s oil potential

Production losses so far have been fairly small, and have only been felt domestically. However, the larger impact of the conflict potentially lies in the medium to long term.

 

The uncertainty surrounding Iraq’s future will undoubtedly disrupt foreign investment and inevitably delay economic development until 1) the situation stabilizes, 2) security is guaranteed, and 3) the political landscape is defined and perceived as serious and sustainable. In the meantime, international companies (upstream, downstream, petrochemicals, etc.) will likely refrain from participating in new projects, even in the south. Trade partnerships will also be tested.

 

The recent insecurity has already prompted Iraq’s largest customers, India and China, to preemptively look for supply alternatives. Longer term, the instability and political deadlock introduce the risk that production growth from Iraq remains short of ambitious targets.

*  *  *

As we noted previously... Harvard's Meghan O'Sullivan concludes...

 
 

First, the US needs to view Iraq and Syria as completely interwoven – perhaps two countries, but one theater in reality. It needs to view IS for what it is, a threat to US and regional interests, not just as a threat to the Iraqi government. This would suggest more military involvement to push back against IS. Both in Iraq and Syria, the crisis is ultimately a political one, not a military one, so changing the politics is also key. But the US should not think that it can sequence military help only to follow political reform – the two must come together given the urgency of the situation.

 

While the United States continues to deliberate about its next moves, others – Syria, Iran, Russia – have been filling the vacuum in ways that are not aligned with US interests. Along with political pressure, more US military assistance to Baghdad and even to the Kurds will give the US political leverage when it comes time to help the Iraqis renegotiate their political compact. The moment in which the US can make a difference and truly affect the outcome is narrowing dramatically every day.

 

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Thu, 07/24/2014 - 17:38 | 5000686 HeavydutyMexica...
HeavydutyMexicanOfTheNorthernKingdom's picture

Mexicans Bitchez!

Thu, 07/24/2014 - 17:51 | 5000775 Stoploss
Stoploss's picture

LOL!!!

 

Lemme guess, they pay Meghan a lot of money!!!

So, send her in first to clear us a path...

Thu, 07/24/2014 - 18:05 | 5000862 ZerOhead
ZerOhead's picture
Iraqi Oil In Context: 60% Of OPEC Growth Expectations

That's a misleading headline since 50% of that oil will be coming from Kurdistan and another 20% will be coming from the Islamic State of Sheik'n Bakr...

Thu, 07/24/2014 - 20:17 | 5001568 Slave
Slave's picture

That producer chart explains why we're starting shit with Russia.

Thu, 07/24/2014 - 18:35 | 5001058 tempo
tempo's picture

NO one care about fighting IS over sand. The big boys and guns will defend the oil. Its no problem.

Thu, 07/24/2014 - 17:43 | 5000718 Sudden Debt
Sudden Debt's picture

I wonder how long the Iraqi's will keep living in poverty while their oil is being stolen by the rich presidential donnateurs...

Thu, 07/24/2014 - 18:03 | 5000854 Wun Hun Lo
Wun Hun Lo's picture

test

 

Thu, 07/24/2014 - 17:45 | 5000731 RaceToTheBottom
RaceToTheBottom's picture

We shouldn't worry, we can just come back into Iraq and sort things out should the need occur in the future.  

Heck, we went in there the first time because of a threat to some losers dad, and because we goaded Iraq's leader into mentioning selling oil for Gold.

Thu, 07/24/2014 - 17:47 | 5000743 DaveyJones
DaveyJones's picture

amazing how "capacity growth" is related to Patriot Act growth

Thu, 07/24/2014 - 18:45 | 5001129 Citxmech
Citxmech's picture

That second chart regarding expected growth is the biggest crock of shit I've seen in a while.  Do these clowns really think anybody will beleive that we can add 20mbpd of actual production into 2023?

OMFG.

Thu, 07/24/2014 - 19:04 | 5001243 CrashisOptimistic
CrashisOptimistic's picture

It's not that bad.  20 mbpd sounds about right.

You have to offset that with 5% decline from already producing fields.

Present output is 75 mbpd.  5%/yr on that is about 4 mbpd downward per year.

20 added by 2020 minus 4X6 = minus 4 mbpd net.

This is not good.

Thu, 07/24/2014 - 19:20 | 5001301 Citxmech
Citxmech's picture

OK - I see your point - I was thinking net.  But I'm not sure if it matters much.

If, when all the balances are summed, we're at a net loss year-over-year - we are absolutely and completely fucked.

 

Thu, 07/24/2014 - 19:48 | 5001440 DaveyJones
DaveyJones's picture

exactly and you might also add increasing domestic consumption (there's not ours) for further output declines 

Thu, 07/24/2014 - 17:50 | 5000773 CrashisOptimistic
CrashisOptimistic's picture

What Goldman doesn't say is that as recently as 3 yrs ago projection wackos (of which Iraq's oil minister was one) called for 17 million bpd by 2017 out of Iraq.

They're at 3.3 mbpd now.  Only 13.7 mbpd to go in the next 3 yrs.

They will be lucky to ever get more than 5.  Ever.  And that for not very long.

Thu, 07/24/2014 - 17:57 | 5000828 Spastica Rex
Spastica Rex's picture

With a little extra effort on Iraq's part...

Thu, 07/24/2014 - 19:49 | 5001445 DaveyJones
DaveyJones's picture

that reminds me, is any oil producing country honest about its output assets?  Whyexactly is Saudi Arabia doing massively expensive offshore rigs now?

Thu, 07/24/2014 - 17:52 | 5000790 passenger_pidgin
passenger_pidgin's picture

Maybe the IMF can save production with another hockey stick chart.

Thu, 07/24/2014 - 18:09 | 5000909 samsara
samsara's picture

Paraphrasing Kunstler about oil;

"We're gone thru most of the champagne on the banquet table and many of the remaining glasses will be spilled in the mad dash get one of the last ones."

Thu, 07/24/2014 - 19:54 | 5001459 DaveyJones
DaveyJones's picture

tar sand, shale, and other non oil tricks have been known about for decades and decades. They were never turned to because they were so relatively unattractive. The fact that we are turning to them now, throwing massive energy, water, toxic chemicals, heavy truc s that damage roads etc at them is what we call "circumstantial evidence" that the sweet stuff is nearly gone but the world demand (and credit economies that despearately rely on them) are still here.....for now.  

Thu, 07/24/2014 - 19:17 | 5001321 q99x2
q99x2's picture

ISIS works for the Queen

Thu, 07/24/2014 - 20:42 | 5001661 CrimsonAvenger
CrimsonAvenger's picture

And don't forget there's a Biden involved in Ukraine's energy industry, so that's gonna get all fucked up now too.

Thu, 07/24/2014 - 20:55 | 5001711 TulsaTime
TulsaTime's picture

Here, in glorious detail. is the detail of Peak Oil, in most of it's radiant glory.  The big pools of oil near the surface have been found and sucked dry, leaving the shales, the 'very heavy crude', and the not quite oil of the tar sands.  Not convincing enough?  The big problem is financing future production, since there are no more cheap finds.  Oil at 200+ a barrel could be seen in our lifetimes with very little in the way of a warning.  Check out http://ourfiniteworld.com/  for some good ole tedious nuts n bolts about the great future we have within view.

Thu, 07/24/2014 - 21:55 | 5001911 samsara
samsara's picture

See my post below

Fri, 07/25/2014 - 05:00 | 5002510 SF beatnik
SF beatnik's picture

Because oil is potentially SO productive as a concentrated form of energy, what would be the upper limit on price per barrel?

A time might soon come when someone is willing to pay $1000 or even $5000 per bbl in inflation adjusted dollars.   

Thu, 07/24/2014 - 22:02 | 5001943 teslaberry
teslaberry's picture

the less they pump now the more they pump later. after all, the price going UP is not the problem. it is the price going DOWN that creates huge problems for the status quo international monetary system. 

this is why the united states WONT even attempt to crash the oil price to fuck with putin, because they'd be cutting off their own whole face, to spite their nose.

Fri, 07/25/2014 - 07:43 | 5002763 dogismycopilot
dogismycopilot's picture

Iraq production costs are the lowest in the world - what is killing the IOCs is that most of them are on TSCs (Technical Services Contracts) and so they get a fixed price for each Barrel. The security costs are also another issue for them - security costs going up. Totally fucked up political situation and totally fucked up labor pool (smart and talented Iraqis left a long time ago). Of course Port Um Qasr and oil terminals are a SHIT HOLE.

But make no mistake, Iraq is the last bastion of cheap, easy to produce crude...

EIA in 2012 had 3 scenarios for Iraq Oil Production: High=9 million by 2020 and 10.4 million by 2035

medium=6.1 million by 2020 and 8.3million by 2020

low=4 million by 2020 and 5.1 million 2035

(those are barrels per day boys and girls)

Current Iraq production last month 3.6 million barrel per day - the bigger questions is WHAT THE FUCK IS IRAQ DOING WITH MONEY THEY'RE MAKING CUZ THEY ARE KIDDING THEIR BALLS KICKED IN BY ISIL. THE PLACE IS STILL A SHIT HOLE AND GOING TO IRAQ IS LIKE GOING TO STONE AGES STILL. 

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