The Iraqi oil industry sees no reason why recent violence in the country should influence its output in the foreseeable future.
Militants recently took control of the western town of Fallujah but oil industry spokesmen are quick to point out that the troubled province of Anbar is some distance from Iraq’s main oil fields located in the southeast and northeast of the country.
“Over the next year, a rise in violence is unlikely to materially impact oil production and exports from southern Iraq. Deteriorating security conditions in central and western Iraq are hundreds of kilometres away from oil facilities around the Basra region, where the bulk of Iraq’s oil is produced,” analysts Eurasia Group told Reuters.
The coming year will be an important one for Iraq’s oil industry as it looks to confirm its status as the 2nd largest oil producing nation in Opec, behind Saudi Arabia.
The Iraqi government’s official export target for 2014 is 3.4 million barrels per day (bpd), an increase of 1 million bpd from last year. This target is believed to be slightly over ambitious, but more conservative estimates predict that Iraq could produce 2.8 million bpd. This figure is dependent upon the assumption that the threat from militants can be contained.
Keeping the militants at bay is crucial in securing the confidence of International Oil Companies (IOCs) in the country and in securing Iraq’s production levels for the future.
“The IOCs can cope with the violence in Iraq as long as it’s far away. If it spreads, they may re-think their positions – if only in the short-term – and that would have an impact on production,” Mohammed al-Jibouri, Iraq’s former trade minister, told Reuters.
It is estimated that Iraq has the fifth biggest oil reserves in the world and IOCs Exxon Mobile, BP, Royal Dutch Shell, and Eni have been excavating the oil fields at West Qurna-1 and Zubair, in the southeast of the country, since 2010.
A rise in output of around 300,000 bpd has been predicted for Iraq’s southern oil fields, including Shell’s Majnoon field and Lukoil’s West Qurna-2.
The violence in Falluja and the west of Iraq has raised concerns about the security of infrastructure located elsewhere in the country, namely the export pipeline to Turkey running through Salahaddin and Nineveh provinces, as well as the Akkas gas field in Anbar near the Syrian border.
“The situation in Anbar will have no direct impact on oil operations in southern provinces, where the violence is unlikely to spread. There are concerns about the northern Iraq-Turkey pipeline, which has been sabotaged repeatedly, if the unrest spreads to provinces such as Nineveh and Salahaddin,” Sam Wilkin, of the Control Risks consultancy told Reuters.
With elections scheduled for April and the ongoing fallout from neighbouring Syria’s civil war, 2014 promises to be a key year for the Iraqi oil & gas industry. Stopping incursions by militants will be the first step to ensure that Iraq stays on course to meet its output targets in 2014.
Â
