Kurdistan's Oil Ambitions

By Brian Swint 

Kurdistan, the self-governing region of northern Iraq, is poised to realize a gusher in revenue from its oil fields. Estimated reserves of about 45 billion barrels of crude have piqued the interest of several of the world’s largest oil companies. Although getting crude out of the country has until now been a challenge, the opening of a pipeline into Turkey at the start of 2014 will make it significantly easier to get the oil to markets. “We’re looking at multibillion barrels,” says Dougie Youngson, an analyst at VSA Capital in London. “The operators are sitting on huge resources that they want to start commercializing.”

Once it gets going, the pipeline, built and owned by the Kurdistan Regional Government, could result in exports of about 400,000 barrels of oil annually, according to the government. The output will jump to 1 million barrels a year by 2015, and 2 million barrels by 2019, says Ashti Hawrami, Kurdistan’s minister of natural resources. Such estimates have prompted ExxonMobil(XOM), Total (TOT), Chevron (CVX), and Gazprom (GAZP:RU) to sign exploration agreements with the government. If it were a country, Kurdistan would rank 10th among the largest oil-holding sovereigns in the world. It produces about 200,000 barrels per day, with 50,000 of that exported to Turkey by truck. Southern Iraq’s oil fields pump out about 3 million barrels per day.

The substantial reserves will help meet increasing global demand at a time when three of the largest producers—Venezuela, Iran, and Saudi Arabia—are closed to many Western oil companies. “Iraq is the only country in the world where you can put a pipe in the ground and the oil starts flowing,” says Maria van der Hoeven, executive director of the International Energy Agency. “It’s the last easy oil.”

Kurdistan’s oil fields do have their political complications. Exxon and Total—both active in southern Iraq—face increased tensions with the central government in Baghdad given a long-standing dispute between Iraq and the Kurds over control of the northern oil fields and export revenue. In September, Hussain al-Shahristani, Iraq’s deputy prime minister for energy affairs, called Exxon’s intention to explore in the region a “serious error.”

But the upside of easy oil outweighs the risks of upsetting Baghdad, for large and smaller producers alike. “This is transformational for both Kurdistan and Genel,” says Tony Hayward, the former chief executive officer of BP (BP)who was appointed CEO of Genel in November 2011. The Turkish company is one of two foreign explorers, along with Norway’s DNO International (DNO:NO), operating in Kurdistan and trucking out its exports. The pipeline, Hayward says, will give Kurdistan greater control over its exports and access to more markets. “For us,” he adds, “not only will we get higher realizations, we’ll get much greater volumes. It allows us to unleash the capacity we already have and to build a lot more capacity.”

Culled from Bloomberg.com

Iraq Oil Exports

Iraq Oil Exports

Even with the extra loading facilities at Basra, a lack of pumping capacity and onshore storage tankswill keep production growth in check, Miswin Mahesh, an analyst at Barclays Plc in London, wrote in a report April 30. Iraq can boost exports from West Qurna-2 or another of the fields being developed only by scaling back flows elsewhere, he wrote.

Some Asian refiners have complained about the presence of too much water in some cargoes from Iraq, the result of inadequate oil-treatment facilities, according to Mahesh. High sulfur content in the main Basrah Light grade has also been an issue, R.K. Mehra, head of international trade at Bharat Petroleum Corp., an Indian refiner, said in Abu Dhabi on May 7.

“We don’t see significantly more export capacity” this year, Alexander Poegl, an analyst at JBC Energy GmbH in Vienna, said by phone on May 13. “The volumes we’ve seen earlier in the year are kind of the maximum we would expect to happen. It’s a healthy development in Iraq, but we don’t see the big numbers others might sometimes suggest.”

Credit: Bloomberg.net

Current Potential of Iraq Crude

Potential of Iraq Crude

By Grant Smith

More than 1 million barrels from Iraq’s Kurdish region were shipped from Turkey to Europe last week, according to Turkish Energy Minister Taner Yildiz and Kurdish authorities. Iraq’s government, which says the Kurds have no right to sell oil independently, tried to stop the shipment and asked theInternational Chamber of Commerce to intervene.

“Iraq has a huge amount of potential, and yes, there will be delays, but they will deliver,” Amrita Sen, chief oil market strategist at Energy Aspects Ltd. in London, said by e-mail on May 6. The consultant forecasts production of 3.3 million barrels a day this year, rising to 3.65 million in 2015.

Credit: Bloomberg.net

Iraq Crude Oil Production - Overtaking Iran

Iraq Crude Oil

By Grant Smith

Iraq overtook Iran in 2012 to become the second-largest producer in the Organization of Petroleum Exporting Countries. It would need to produce about another 6 million barrels a day to top Saudi Arabia.

Iraq is seeking to overcome the constraints on exports, Ghadhban, the prime minister’s adviser, said in an interview in Dubai. That includes adding a third mooring point at the southern Basra oil terminal by July, which will increase capacity by 900,000 barrels daily, he said. Companies have been shortlisted to build a pipeline to Jordan’s Aqaba port, the government said in April. Another link crossing Iraq from north to south is under construction, providing an alternative route for crude from northern fields.

Iraqi crude is still sought after because the country is offering 60-day credit terms, compared with the 30 days typically available from Middle Eastern suppliers, according to Namdeo of Hindustan Petroleum. (HPCL) The refiner is increasing purchases by 8 percent this year to 3.25 million metric tons.

Credit: Bloomberg.net

Effect of Iraq Crises on Global Benchmark

By Grant Smith

Brent crude, a global benchmark, is trading above $100 a barrel for a 23rd consecutive month, the longest stretch in data starting in 1988. Prices will average more than $100 this year and in each of the next three years, according to analyst estimates compiled by Bloomberg. It traded at $110.27 a barrel at 11:10 a.m. in London.

Iraq’s production contracted 7 percent since reaching a 35-year peak of 3.6 million barrels a day in February, according to the International Energy Agency. The Basrah Oil Terminal in southern Iraq is scheduled to load 2.5 million barrels a day of crude for export this month and 2.7 million in June, according to loading programs obtained by Bloomberg News.

Shipments from the south, the only region exporting regularly, will probably stall at about 2.5 million barrels a day, unless work on storage tanks, pumping stations and other infrastructure is completed, the Paris-based IEA said in a report May 15.

“There are still lots of uncertainties regarding deliveries,” B.K. Namdeo, refineries director at Hindustan Petroleum Corp., said in Mumbai on May 13. “If the situation continues or worsens, we may have to cut Iraqi oil imports next year and switch to countries like Iran.”

Credit: Bloomberg.net

Iraq Oil Revival Stalls Again as Violence Pinches Growth

By Grant Smith and Nayla Razzouk  

The revival in Iraqi oil output has stalled again.

Production forecasts for 2014 are getting less optimistic. The Oil Ministry’s official target is 4 million barrels a day by the end of the year. More likely it will be 3.75 million, Thamir Ghadhban, an adviser to the prime minister, said in an interview May 14. Or perhaps 3.4 million, about the same as last month, according to the average of six analyst estimates compiled by Bloomberg News.

Violence and conflict are pinching growth for OPEC’s second-biggest member. While Iraq added about 2 million barrels to daily production since 2003, the year of Saddam Hussein’s ouster, attacks on pipelines and an oil-revenue dispute with the semi-autonomous Kurdish region are diminishing the country’s dependability as a supplier. They’re also contributing to making oil more expensive, VTB Capital said.

“Iraq always seems to be the producer of the future,” Mike Wittner, head of oil market research at Societe Generale SA in New York, said by phone May 13. “The entire world has been upbeat on Iraq’s prospects for the last couple of years. But it’s not steady growth. They have to get the security situation sorted out, or that’s going to continue to hamper them.”

Iraq’s exports to Europe have been curbed since early March because of sabotage on its northern pipeline to Turkey. New supplies from the Kurdish region are mostly halted because of the dispute with the central government. Prime Minister Nouri al-Maliki may need to form a broad coalition to remain in power after last month’s parliamentary elections, potentially slowing oil-policy decisions.