October 28, 2010 / 10:44 AM / 9 years ago

POLL-Iraq oil output seen edging up, not yet game-changer

 * Any forecasts could be derailed by increase in instability
 * Twelve million bpd capacity target illusory for now
 * Iraq production unlikely to be game-changing in near-term
 
 By Barbara Lewis and Rania El Gamal
 LONDON/BAGHDAD, Oct 28 (Reuters) - Iraq's crude oil output should rise to
2.8 million barrels per day by 2011 from roughly 2.5 million bpd now and reach
around 4.6 million bpd by 2015, according to a Reuters survey -- not yet the
surge that would make a radical difference to OPEC policy or world oil markets.
 Security problems and inadequate infrastructure after decades of war and
sanctions have depressed Iraqi output, which is still below a peak of around 3
million bpd hit before the 1991 Gulf War.
 The most conservative of the analysts polled pegged Iraqi output at 2.5
million bpd by the end of 2011, while the most optimistic saw production rising
to 3.2 million bpd.
 While that range is narrow, for the end of 2015 predictions varied from 4
million bpd to 5.5 million bpd, a difference with potentially major implications
for the oil price.
 The mean and median prediction of analysts polled was 2.8 million bpd for
the end of 2011 and respectively 4.6 million bpd and 4.5 million bpd for 2015.
 Barclays Capital has cautioned against excessive optimism about rising
output given the challenges.
 Rather than give a year by year forecast, it predicted 3.5 million bpd by
the end of 2014, but, citing political impasse and poor security, said "there
does appear to be a growing potential downside even to that relatively downbeat
forecast."
 Saudi Arabia, the United Arab Emirates and Kuwait were likely to remain for
now the only three OPEC countries with sufficient spare capacity to make a
difference to the oil market at the margin.
 "Iraq might well get there one day well into the future, but the road ahead
is a long and treacherous one," the bank said in a note.
 Oil firms that signed contracts last year to develop Iraqi oilfields
declined to give public comment on their progress.
 Irish explorer Petrel Resources, which has been continuously active in Iraq
since 1999 and won a field development contract in 2005, even before last year's
oil bidding rounds, also took a cautious view and gave only tentative forecasts.
 "Progress will happen, but slowly and more difficult than expected," said
David Horgan, managing director of Petrel.
 "The underlying output trend is slowly down -- though there are obvious,
relatively easy improvements that should arrest this," Horgan said.
 "We should get a couple of million barrels per day easily in the next 3
years but the hyped numbers are unrealistic given the state of the ministry,
water for injection, infrastructure, security."
 In view of all the uncertainties, Samuel Ciszuk of IHS consultancy gave a
range, predicting output would reach between 3 million and 3.2 million bpd by
the end of 2011 under his most optimistic scenario and 5.5 million bpd by the
end of 2015.
 A "more realistic, but not pessimistic case," said Ciszuk, would place
output at 3.1 million bpd at the end of next year and 4.5 million-4.6 million
bpd by the end of 2015.
 
 NO NEED FOR AN OPEC TARGET YET
 Oil Minister Hussain al-Shahristani's has said he expects 4 million bpd in
three years' time and that there is no need for Iraq -- for now the only OPEC
member exempt from its system of output curbs -- to have a production target
until then.
 Iraq has already begun to position itself for a high limit, however.
 The contracts it signed with oil companies last year could in theory take
its oil capacity to 12 million bpd in seven years' time, placing it on a par
with OPEC's biggest producer Saudi Arabia, although for most the goal remains
hypothetical.
 "The 12 million barrels is crazy," Total CEO Christophe de Margerie told
reporters late last year. "We know there's a potential to maybe reach 7 to 8
million barrels some day and that alone would be a tremendous success."
 Earlier this month, Iraq pitched for an OPEC target second only to Saudi
Arabia's when it raised its proven oil reserves figure by a quarter, taking it
above Iran, currently OPEC's second biggest producer. But then Iran raised its
oil reserves figure back above Iraq's and both countries have made clear there
could be further upward revisions.
 The Organization of the Petroleum Exporting Countries, which in the past,
has used reserves estimates as part of its calculations of individual production
targets has so far managed to avoid potentially bitter debate on realigning
goals because the oil market has held firm and excess supplies have been
absorbed.
 A faster-than-expected increase in Iraqi production or a
weaker-than-expected world economy could easily change that supply-demand
balance against the backdrop of great political uncertainty in Iraq and global
economic fragility.
 A Reuters poll found oil demand next year would rise by 1.5 million bpd --
half the peak demand growth of 3 million bpd in 2004, according to the
Paris-based International Energy Agency, adviser to industrialised countries on
energy.
 Below is a table showing the 10 responses used to calculate the mean and
median of 2.8 million bpd for end-2011 and of 4.6 and 4.5 million bpd for
end-2015.

Respondent Estimated production  end-2011 2012  2013  2014  2015  2016   2017
        in mbpd
Deutsche Bank                      2.85    3    3.3   3.8   4.4
Dunia Frontier Consultants         2.5     3    3.5   4     5.5
Iraq Energy Institute              2.75    3.1  3.8         4.2
JBC Energy                         2.85    3.3  3.9         4.9
Economist Intelligence Unit        2.65    2.87 3.14  3.49  4.21  6.02
Eurasia consultants                2.8     3.3  3.8         4.8
London School of Economics         3.2     3.8  4.3         4.5   4.5
Neftex Petroleum Consultants       3       3.9  4     4.2   4.4
Oil company (asked to be unnamed)  2.7     3    3.8   4.5   5.5
Consultancy (asked to be unnamed)  3       3    3.5   4     4            5
 (Additional reporting by Isabel Coles in London and Martina Fuchs and Humeyra
Pamuk in Dubai; editing by James Jukwey)

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