Iraqi oil output rises but remains below pre-war 2003 level

By Tony Capaccio
Bloomberg News

International oil companies in Iraq have increased production slightly since October, with better than expected output in southern Basra’s fields — indications the country’s most important industry continues its recovery, according to a new U.S. Defense Department audit.

Crude oil production averaged 2.40 million barrels per day, more than 3 percent above the previous quarter and 1 percent less than the same period in 2009, Stuart Bowen, the Special Inspector for Iraq Reconstruction, said in his latest quarterly report released today.

That level is below Iraq’s February, 2003, 2.8 million barrels per day production, the month before the U.S.-led invasion. Then-U.S. Vice President Dick Cheney said in April 2003, after Saddam Hussein was driven from office, that Iraq could increase oil production to 2.5 million to 3 million barrels daily by year’s end. Production in May 2003 fell to 1.4 million barrels a day and then to 1.3 million later that year. It’s slowly grown since.

“This quarter was good for Iraq economically,” Bowen wrote in his 28th congressionally mandated quarterly report that assesses the expenditure of $58 billion in U.S. reconstruction funds and Iraq’s political and economic progress, as the remaining U.S. troops prepare to leave by December.

“The Iraqi government’s aggressive efforts to attract foreign capital investment continued to bear fruit. Moreover, several international oil companies working to develop Iraq’s lucrative southern oil fields, reported better-than-expected progress, including the super-giant al-Rumaila field,” Bowen wrote.

The Anglo-Chinese consortium of BP Plc and the Chinese National Petroleum Corp. reported this month increased production at al-Rumaila by more than 10 percent above the initial rate of 1.066 million barrels per day agreed to with the Iraq government when it won the oil business in 2009.

In northern Iraq, the Ninewa Oil Commission announced in November that production of the Batna oil field had resumed for the first time in 20 years.

Better Coordination

“Amid this increased activity,” the U.S. government’s International Oil Company Support Team created in August has been coordinating with oil companies “regardless of country origin to help them deal with administrative, logistical and bureaucratic challenges,” Bowen wrote.

Pipeline security has improved, with the number of daily attacks “significantly reduced as government cooperation grows with local residents,” he wrote.

Iraq is the world’s 12th largest oil producer and has the fourth largest proven petroleum reserves after Saudi Arabia, Canada, and Iran. Just a fraction of its known fields are in development, according to data from the U.S. Department of Energy’s Information Administration.

The majority of Iraq’s oil production comes from three giant fields in North and South Rumaila in southern Iraq and Kirkuk in the north.

The Iraqi government told Bowen’s office how it planned to achieve its “ambitious goal of 12 million barrels a day by 2017, or about five times the current level.”

The oil ministry projected production would reach 3.26 MBPD by December 31.

Bowen said outside experts view these goals with skepticism because meeting the government target would require “making a significant investment — estimated by some to be $150 billion or more.” Iraq also would need to overcome “considerable political, logistical, transportation and infrastructure challenges,” Bowen wrote.