January 30, 2014 (TSR) – Iraq is poised to flood the oil market by tripling its capacity to pump crude by 2020 and is collaborating with Iran on strategy in a move that will challenge Saudi Arabia‘s grip on the Organization of Petroleum Exporting Countries (OPEC), a report says.
“We feel the world needs to be assured of fuel for economic growth,” Hussain al-Shahristani, Deputy Prime Minister for Energy in Iraq told oil industry delegates attending a Chatham House Middle East energy conference, the Telegraph reported on Tuesday.
Al-Shahristani said that Iraq plans to boost its capacity to produce oil to 9 million barrels a day (bpd) by the end of the decade as Baghdad rushes to bolster its economy, which is still shattered by war and internal conflict. Iraq was producing 3 million bpd in December, according to the International Energy Agency.
Iraq’s intention to challenge Saudi Arabia’s status as the “swing producer” in the OPEC organizaiton could see a dramatic fall in oil prices if Baghdad decides to break the group’s quotas and sell more of its crude on the open market.
“It’s very difficult to predict actual world (oil) demand by 2020 because the world economy is unpredictable,” said al-Shahristani.
In a further challenge to Saudi Arabia, which is mostly closed to international oil companies, al-Shahristani revealed that Baghdad is working with Iran to help it attract investment ahead of the possible lifting of sanctions. Oil companies are understood to be queuing up to win Iranian oil deals.
“Iran has been in touch with us,” said al-Shahristani. “They want to share our contracts model and experience.”
Combined, Iran and Iraq hold greater reserves of oil than Saudi Arabia and the potential with the help of international investment to match its capacity to produce oil, which currently stands at around 12.5 million bpd of crude.
British oil giants BP and Royal Dutch Shell are also poised to benefit from Iraq’s production plans. Both companies are already managing two huge oil fields in southern Iraq which are vital if Baghdad is to achieve its goal.
