The Iraqi Oil Ministry Wednesday insisted that it was on track to achieve a crude oil production target of 6.5 million b/d by 2014, and disputed a recent IMF report suggesting a lower output rise because of infrastructure challenges.
Oil Ministry spokesman Assem Jihad said in a statement that Iraq expected its oil production, currently at around 2.7 million b/d, to rise to 3.3 million b/d in 2012, 4.5 million b/d in 2013 and 6.5 million b/d the following year.
Iraq is targeting close to 13 million b/d of production capacity by 2017 after awarding long term service contracts to foreign oil companies for development and further development of some of its biggest oil fields.
The latest oil ministry figures obtained by Platts show that Iraq produced 2.63 million b/d in February, down slightly from a post-war record of 2.652 million b/d in January.
Jihad said the targets were in line with plans established in coordination with the foreign oil companies.
Oil Minister Abdul Karim Luaibi had not seen the figures contained in the IMF report but they appeared based on "inaccurate data and reports," he added.
The IMF said in a country report issued March 28 that while Iraqi oil production was projected to increase considerably over the medium- to long-term, to 12.2 million b/d over the next seven years in a best case scenario, there were infrastructural risks that could hamper the developments.
"While these production goals could be feasible in the longer term, the main risks in the coming years will be bottlenecks in the export infrastructure that will need to be addressed," the IMF said.
Noting that the government had plans to expand the country's oil, pipeline and export infrastructure, it said execution would take time, in which case production would rise to 5.35 million b/d by 2017 if a more conservative scenario was adopted.
"In addition, large investments in supporting activities are also underway and planned, including the construction of desalination plants to produce water for injection in the fields, and storage facilities. These investments will require time to implement, and suggest a more gradual increase in Iraq's oil production," the IMF said. "Based on more conservative assumptions for the time it will take to expand Iraq's export capacity, oil production could still increase to over 5 million b/d by 2017."
Jihad, referring to the report, said that the ministry had put port and storage expansion projects on a fast track.
These plans include building 24 new storage tanks with capacity of over 300,000 b/d as well as floating platforms with capacity of 900,000 b/d each to absorb the anticipated higher exports. The plans also include two single point moorings to link the storage tanks to southern export terminals.
The project, which Jihad said would normally take 4-5 years to complete, will raise export capacity by 1.8 million b/d and be completed by the end of this year. The second phase will be finished by the end of next year, he said.
Current export capacity from the south is estimated at 1.6 million b/d and the lack of storage facilities has hampered a more rapid rise in oil production from southern oil fields, where output has risen by more than 300,000 b/d since the start of the year.
The additional crude has come as the leaders of three foreign consortia awarded contracts to develop the giant Rumaila, Zubair and West Qurna 1 oil fields have reported reaching the 10% initial output hike from the three fields. However, latest figures from the oil ministry show that output has fallen slightly, apparently because of restricted export and storage capacity.
The IMF report was a second review after approval of a $471.1 million standby arrangement for Iraq, which relies almost exclusively on oil exports revenues for its foreign currency earnings.
The IMF said that oil export revenues in 2010 exceeded budgetary projections as higher oil prices offset lower export volumes. It said exports last year averaged 1.85 million b/d, well below Baghdad's 2.1 million b/d target.
"The shortfall reflected periods of bad weather and attacks on pipelines, as well as the lack of an agreement with the Kurdish region to secure additional exports," it said.
"Export prices were substantially higher, however, averaging just over $74/barrel during the year, compared to a budgeted price of $62.50/barrel," it said, adding that total oil export revenues reached $50 billion in 2010 compared with a budget forecast of $48 billion and up from $39 billion in 2009.
But this was still well below the peak of $63 billion in 2008, when oil prices rose to a record above $147/b before shedding more than $100/b by the end of that year.
The resumption of Kurdish oil exports in early February pushed up Iraqi oil exports to 2.2 million b/d, the highest since March 2003. Iraq has targeted exports of 2.25 million b/d in 2011, including 100,000 b/d from the Kurdish province.
It based its 2011 budget on an oil price assumption of $76.50/b, below current global oil prices. Brent crude oil futures are currently trading at around $115/b.
