Axelrod Energy Projects LLC www.axelrodenergyprojects.com 1
Feb 14, 2016
Axelrod Energy Projects LLC www.axelrodenergyprojects.com 1
Axelrod Energy Projects LLC www.axelrodenergyprojects.com
Outlook for Iraqi Crude OilProduction and Exports
Muayyad Al-ChalabiAxelrod Energy Projects LLC
Columbia UniversitySchool of International and Public Affairs
December 3, 2012
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Overview
• Brief history of the Iraqi oil sector• Iraqi reserves• Development contracts• Infrastructure development• Challenges– Internal– External
• Conclusion
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Brief history of Iraqi oil sector• 1912: Establishment of the Turkish Petroleum Company to
negotiate an oil concession from the Ottoman Empire• 1920: TPC receives concession from the British Mandate in Iraq.• 1927: Oil struck near Baba Gurgur. Broad international
participation in the TPC.– 75 year term for exploration rights– Iraqi government would receive royalties on production, but royalties
contingent on oil company profits, and not payable for the first 20 years• 1930: 70-year concession negotiated by the Iraq Petroleum
Company (IPC)• 1932: British mandate ends, but Hashemite monarchy maintains
a pro-western stance.
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Brief history (continued)• 1951: Mossaddegh nationalizes oil operations in Iran. British
led embargo on Iranian oil. Mossadegh overthrown in 1953.• 1958: Hashemite Kingdom overthrown by Abd al-Karim
Qasim• 1959: Qasim withdraws Iraq from Baghdad Pact• 1960: Iraq helps found OPEC. Qasim threatens legislation to
revoke a large portion of the concession granted to the IPC.• 1963: Qasim ousted in Ramadan Revolution.• 1968: Ba’ath Party rises to power.• 1972: IPC nationalized
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Brief history (continued)
• 1979: Saddam Hussein assumes presidency• 1980–1988: Iran-Iraq War• 1990–1991: Gulf War I.– 1990–2003: Sanctions on Iraq. No-fly zones
enforced.– 1995–2003: UN Oil-for-Food Program
• 2003–2011: Gulf War II – 2007: The military surge
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Iraq oil production (1958-2012, kb/d)Q
asim
Cou
p (1
958)
OPE
C fo
rmed
(196
0)
Ba'a
th P
arty
(196
8)
IPC
nat
iona
lized
(197
2)
Iran-
Iraq
War
(198
0)
Iran-
Iraq
War
end
s (19
88)
Inva
sion
of K
uwai
t (19
90)
Oil-
for-F
ood
Prog
ram
(1...
IOC
reen
try (2
008)
0
500
1000
1500
2000
2500
3000
3500
4000
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Iraq proven oil reservesIraq Historical Proven Reserves (billion barrels)
Oil Reserves in the ME by Country (million barrels)
Country 2012
Saudi Arabia 264,520
Iran 151,170
Iraq 143,100
Kuwait 101,500
UAE 97,800
Qatar 25,380
Oman 5,500
Syria 2,500
Yemen 3,000
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
0
20
40
60
80
100
120
140
160
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Iraqi oil fieldsFields Region Reserves
(bbl)West Qurna South 43.0
Rumaila South 17.0
Majnoon South 12.6
Kirkuk North 8.6
East Baghdad Middle 8.1
Halfaya South 4.1
Zubair South 4.0
Missan Middle 2.5
Bai Hassan North 2.3
Najmah North 0.9
Gharaf Middle 0.9
Qayarah North 0.8
Other 38.2
Total 143.0
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Oil Development Contracts
Type Ownership of Extraction Rights
Ownership of Production
Concession IOC IOC
Joint Venture
Shared Shared
Production Sharing
State Shared
Services Contract
State State
• Iraq model contract– 20 year service
agreement– Government has 25%
stake in operating company, IOCs have remaining 75% stake
– Government pays the operating company a fixed fee of ~$2 per barrel for oil produced.
– IOC not granted exclusive rights to either exploration or production
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Iraq oil development contracts
First Round (2009)Field Region IOC PPT
(kb/d)Rumaila South BP, CNPC 1,750
West Quarna
South EM, Shell 600
Zubair South ENI, Occidental, Kogas
400
Misan South CNOOC 275
Second Round (2010)Field Region IOC PPT
(kb/d)Majnoon South Shell,
Petronas1,800
Halfaya South CNPC, Total, Petronas,
535
Qaiyarah North Sonangol 120
West Qurna (II)
South Lukoil, Statoil
1,800
Garraf South Petronas, Japex
230
Badra East Gazprom, Kogas, Petronas, TPAO
170
Najmah North Sonangol 110
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Infrastructure expansion
• Pipeline overhaul and construction– Construction of new on-shore pipelines (6,000 km)– Construction of new off-shore pipelines (300 km)
• Oil storage expansion– Final storage capacity of 60 million barrels– Add 20 million barrels to existing facilities– Build new tank farms with 30 million barrels
• Common seawater supply facility (12-15 mb/d)
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Pipeline infrastructure
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Loading terminal infrastructure
• Loading terminal expansion– Final capacity of 4.8 mb/d– Expand existing loading
terminals with an additional capacity of 1.6 mb/d
– Construct 4 new single point moorings (SPMs) with a total capacity of 3.2 mb/d
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Iraq crude oil production• In July 2012, Iraq becomes second largest producer of
oil in OPEC at 3 mb/d• Robust production growth since 2007– Improved security environment since 2007– IOC investments since 2009
• Iraqi government officially projecting 12 mb/d by 2017.– By comparison, Saudi Arabia’s total production capacity is
12 mb/d, with actual production between 8-10 mb/d.– Production targets written into contracts with IOCs total 8.8
mb/d.
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Iraq oil production and exports
• Robust production growth• Domestic demand
– Small domestic refining capacity
– No new domestic refining capacity expected until 2019
– Small domestic power generation demand
• Any additional crude production to be exported
Iraq oil production and exports (kb/d)
Sep-
08D
ec-0
8M
ar-0
9Ju
n-09
Sep-
09D
ec-0
9M
ar-1
0Ju
n-10
Sep-
10D
ec-1
0M
ar-1
1Ju
n-11
Sep-
11D
ec-1
1M
ar-1
2
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Consumption Production
Exports
Domestic Use
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Internal challenges
• Lack of a comprehensive hydrocarbon law
• Dispute with the Kurdistan Regional Government– KRG has its own hydrocarbon law,
and has negotiated independent contracts with IOCs on that basis
• Baghdad has banned IOCs doing business with the KRG from bidding on any future contracts
KRG territory
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External challenges
• OPEC production quotas– Iraq exempt since 1998– Iraq’s production quota has been absorbed by Saudi
Arabia, the UAE, Venezuela, and others– Iraq set to reenter the production quota system in 2014.– Conflicting interests
• Need to maintain prices (total production quota cannot rise significantly). Iraq needs $90 per barrel crude in order to meet budgetary requirements.
• Need to carve out a space for Iraq in the production quota system
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External challenges• Historical rivalry with Iran
– Growth in Iraq oil exports has gone to fill the gap left by sanctions on Iran
– Iran is currently the number two country (both in terms of reserves and production quota) in OPEC
– Traditionally, Iran has maintained parity with Iraq in OPEC.– Currently cooperative relationship with Iran may deteriorate rapidly if
Iraqi production and exports grow rapidly– Iran has effective control over the Straight of Hormuz
• Security of pipeline routes to the Mediterranean– Kirkuk-Ceyhan pipeline is frequent target for Kurdish separatists. – Pipeline to Syria will not materialize in the short run– Pipeline through Jordan makes no strategic difference.
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External challenges
• Softening demand– Slow growth in European markets– Slowing growth in Asian markets
• Rising supply in North America• Shale oil backing out imported conventional oil• North America moving towards energy independence
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