Bloomberg News

Iraq Aims to Join OPEC Quota System in 2014, Official Says

October 26, 2011

(Updates with analyst’s comment in fourth paragraph.)

Oct. 26 (Bloomberg) -- Iraq will ask to rejoin OPEC’s quota system for crude output in 2014 as the holder of the world’s fifth-largest oil reserves boosts production from an average of 2.9 million barrels a day.

The country aims to increase output to 3.4 million barrels a day next year and 4.5 million barrels a day in 2013, Falah al- Amri, director of the State Oil Marketing Organization, said today. Iraq is exporting an average of 2.2 million barrels a day this month and earning an average price of $104 a barrel, he said in an interview in the southern city of Basra.

Iraq, the only member of the Organization of Petroleum Exporting Countries exempt from output quotas, relies on revenue from crude sales to rebuild its economy after years of war and economic sanctions. The government wants to boost production to 12 million barrels a day by 2017, Hussain al-Shahristani, the deputy prime minister for energy affairs and former oil minister, said in July.

“Iraq will effectively be taking other countries’ market share” when it re-enters the OPEC system, Samuel Ciszuk, an energy analyst at IHS Global Insight, said by telephone from London. “It will become a source of tension for the group, especially given the very low level of trust that exists there now.”

Flouting Quotas

OPEC sets production limits for its 11 members other than Iraq to try to ensure output doesn’t exceed global demand, though many flout their ceilings when crude prices are high. Iraq hasn’t taken part in an OPEC quota agreement since 1998.

“We will seek the biggest possible quota,” al-Amri said.

His stated target date of 2014 conforms with the group’s own forecasts. Secretary-General Abdalla El-Badri said in 2010 that OPEC would start discussing the matter in “four to five years.”

OPEC supplies 40 percent of the world’s oil, and Iraq ranks third in the group for production, behind Saudi Arabia and Iran, according to data compiled by Bloomberg. Iran’s limit, set in December 2008, is about 3.34 million barrels a day, according to Bloomberg data.

“Iraq will aim to have a quota slightly higher than what Iran will have, since Iraq says they have higher reserves,” Ciszuk said.

The world’s largest international oil companies including Exxon Mobil Corp., BP Plc and Royal Dutch Shell Plc have signed development contracts with Iraq in return for fees for each barrel of oil they sell. The companies have committed to raise output, so Iraq will need to adjust terms of their contracts if it changes its production goals, Ciszuk said.

Missan Oil

Missan Oil Co. expects to increase output by 20 percent to 120,000 barrels a day by the end of this year with additional crude from the Halfaya field south of Baghdad, the company’s Director General Ali Muarej said in a separate interview in Basra. Ten wells will be made operational at the field in the next two months to raise production, he said.

Total SA, China National Petroleum Corp. and Petroliam Nasional Bhd., known as Petronas, are developing Halfaya. CNPC has a 50 percent share in the project, with Total and Petronas each owning 25 percent.

Iraq holds 360 billion barrels of recoverable oil, Luay al Khatteeb, an adviser to the Iraqi parliament’s energy committee, said yesterday at a conference in Istanbul. The country has the fifth-biggest deposits of crude, according to data from BP Plc that also include Canadian oil sands.

Asian Buyers

Iraq ships oil mostly to China, India and other Asian countries, said al-Amri of the state marketing organization.

The government is in “final stages of talks” with BP, Exxon, Eni SpA and Lukoil OAO about a project for injecting sea water into oil fields to maintain the pressure necessary to extract crude, said Abdul Mahdi al-Amidi, the Oil Ministry’s director of licenses and contracts.

“For each barrel of oil, they will need to inject a barrel and a quarter of water,” al-Amidi said in Basra, declining to give an estimate for the value of the project’s contract.

--With assistance from Glen Carey in Riyadh. Editors: Alessandro Vitelli, Bruce Stanley

To contact the reporter on this story: Kadhim Ajrash in Dubai at kajrash@bloomberg.net; Anthony DiPaola in Dubai at adipaola@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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