Iraq oil loss put at $400 billion
Crude reserves could exceed 300 billion barrels
Iraq has lost a staggering $400 billion worth of oil since its destructive eight-year war with Iran two decades ago, more than half the combined Arab gross domestic product, according to a former Iraqi oil official.
But the conflict-battered country remains the world’s second largest oil power after Saudi Arabia and could become number one after security is restored and exploration for more hydrocarbons resumes, says Dr Fadhil J. Chalabi, Executive Director of the London-based Centre for Global Energy Studies.
Chalabi, former Iraqi oil ministry undersecretary and OPEC’s ex-acting secretary general, put Iraq’s current extractable crude resources at 120 billion barrels but said they could
surge to more than 300 billion barrels.
In an interview with Pipeline, he said post-war
development projects could quickly lift Iraq’s crude
production to more than three million barrels per day
while investment of between $25-30 billion is needed
to push capacity to 5-6 million bpd before it peaks to
eight million bpd.
In his opinion, it is in the interest of both Iraq and OPEC
that the country remains part of the 11-nation cartel despite
its political and security woes.
Iraq’s oil facilities have sustained heavy damage because of the invasion and no signs yet for rehabilitation. When do you expect Iraq to be back in the oil market?
Iraq is already in the oil market but at much lower levels or rates than before. Technically speaking, Iraq would regain its capacity very quickly once security is restored and, with sufficient financial allocations, Iraq would easily reach three million barrels per day (mbpd) and even 3.5 mbpd, which was the level before the UN embargo.
What is the size of investment needed to repair damage to Iraq’s oil sector and expanding output capacity over the next five to 10 years? How much could Iraq produce after such capacity expansion programmes are completed?
Once favourable conditions prevail, Iraq’s target will be to reach five to six mbpd in a matter of five or six years.
The total investment requirement for reaching this target would amount to as much as $25-30 billion.
Do you have estimate of Iraq’s total oil loss since the beginning of the embargo and through the invasion?
Iraq’s total oil loss since the embargo and the invasion amounts to 13.2 billion barrels (bnb). If we take the losses resulting from the Iran-Iraq war, Iraq was deprived of a total of over 19 bnb. The value of these lost revenues depends, of course, on the price at which they would have sold, but if we take as an indication the monthly average of oil prices during the entire period from 1980-2002, Iraq’s losses amount to over $400 billion of revenue.
What are the latest statistics on Iraq’s proven oil reserves and its rank among oil countries?
Officially Iraq’s reserves amount to 120 billion barrels of already recoverable oil which places Iraq second only to Saudi Arabia. However, in addition, Iraq has potentially large discoveries yet to be made because of such a long period of under-exploration. Iraq’s ultimate reserves would exceed 300 billion barrels.
What role Iraq can play in preventing a supply crisis if global demand continues its upward growth and Iraq restores security and stability?
Iraq’s role in meeting global demand is potentially crucial because of its vast reserves. According to a study by the Centre for Global Energy Studies, it is possible for Iraq to reach eight mbpd from existing reserves with an additional two to four mbpd from reserves yet to be discovered. This amount of additional oil is more than enough to meet future increasing demand.
Where could the investment needed for capacity expansions come from? Loans or foreign partners and on what basis?
The Iraqi Government has considered opening the industry to foreign investment, mostly on the basis of Production Sharing Agreements. These were negotiated by the previous government with the Russians, Chinese and Vietnamese. With France and Spain there were also negotiations but no agreements were signed.
Do you think Iraq will stay in OPEC once it is back to normal and how do you see oil rehabilitation programmes under US occupation?
It is in the interests of both Iraq and OPEC for Iraq not to work totally independently of OPEC oil and to co-ordinate with OPEC. What matters above all for Iraq’s economic well-being is the maximisation of Iraqi oil revenue and, in this respect, maintaining oil price stability is an important factor, together with achieving peace.
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