Iraq Takes First Step Towards Becoming The World’s Biggest Oil Producer
Iraq’s parliamentary oil and gas committee plans to increase the country’s oil production to more than five million barrels per day, according to the release of committee minutes last week. As analysed in full in my new book on the new global oil market order, not only could this be done with relative ease by Iraq but it could also easily be the precursor to further oil production increases to 13 million barrels per day (bpd) if handled correctly. This would make Iraq the biggest oil producer in the world. In broad terms, Iraq remains the greatest relatively underdeveloped oil frontier in the world. Officially, according to the EIA, it holds a very conservatively-estimated 145 billion barrels of proved crude oil reserves (nearly 18 percent of the Middle East’s total, and the fifth biggest on the planet). Unofficially, it is extremely likely that it holds much more oil than this. In October 2010, Iraq’s Oil Ministry increased its own figure for the country’s proven reserves to 143 billion barrels. However, at the same time as producing the official reserves figures, the Oil Ministry stated that Iraq’s undiscovered resources amounted to around 215 billion barrels. This was also a figure that had been arrived at in a 1997 detailed study by respected oil and gas firm, Petrolog. Even this figure, though, did not include the parts of northern Iraq in the semi-autonomous region of Kurdistan. This meant, as highlighted by the IEA, that most of them had been drilled during a period before the 1970s began when technical limits and low oil prices gave a narrower definition of what constituted a commercially successful well than would be the case now. Overall, the IEA underlined that the level of ultimately recoverable resources across all of Iraq (including the Kurdistan region) at around 246 billion barrels (crude and natural gas liquids). Given the true scale of Iraq’s oil reserves – and the fact that the average lifting cost per barrel of oil in the country is US$1-2 pb (the lowest in the world, along with Iran and Saudi Arabia) – what sort of oil output could reasonably be expected? Back in 2013, the Integrated National Energy Strategy (INES) was produced, and this analysed in detail three realistic forward oil production profiles for Iraq and what each would involve. As also analysed in my new book, the INES’ best-case scenario was for crude oil production capacity to increase to 13 million bpd (at that point, by 2017), peaking at around that level until 2023, and finally gradually declining to around 10 million bpd for a long-sustained period thereafter. The mid-range production scenario was for Iraq to reach 9 million bpd (at that point, by 2020), and the worst-case INES scenario was for production to reach 6 million bpd (at that point, by 2020). Consequently, the 5 million bpd figure announced last week can be regarded as the first easily achievable stepping stone toward those figures. Indeed, according to Iraq’s Oil Minister, Hayan Abdel-Ghani, last week, the country’s oil production capacity already stands above this level – at 5.4 million bpd – although it is still only producing around 4.3-4.5 million bpd overall. The question at this point is, with these enormous reserves in place, and specific plans on how to turn these into up to 13 million bpd in the Oil Ministry’s files, why is Iraq not already producing a lot more oil than it is? The reason is the ongoing endemic corruption that lies at the heart of Iraq’s oil and gas industry. This not only removes enormous amounts of money from Iraq’s coffers that could fund much-needed infrastructure investments but also deters Western companies with the required technology, logistical expertise, and personnel from becoming too involved in the country. Although commissions are standard practice in the Middle East – and indeed across many business around the world – the practice has become something else entirely in Iraq. This has been highlighted repeatedly by OilPrice.com and independently over many years by Transparency International (TI) in various of its ‘Corruption Perceptions Index’ publications, in which Iraq normally features in the worst 10 out of 180 countries for its scale and scope of corruption. “Massive embezzlement, procurement scams, money laundering, oil smuggling and widespread bureaucratic bribery that have led the country to the bottom of international corruption rankings, fuelled political violence and hampered effective state building and service delivery,” TI states. “Political interference in anti-corruption bodies and politicisation of corruption issues, weak civil society, insecurity, lack of resources and incomplete legal provisions severely limit the government’s capacity to efficiently curb soaring corruption,” it concludes. The sums of money that Iraq has lost could have funded all the major projects needed to boost oil production up to at least 7 or 8 million bpd to begin with, notably the crucial Common Seawater Supply Project (CSSP), as also analysed in my new book. According to a statement made in 2015 by then-Oil Minister – and later Prime Minister of Iraq – Adil Abdul Mahdi, Iraq “lost US$14,448,146,000” from the beginning of 2011 up to the end of 2014 as “cash compensation” payments to international oil companies and to other entities. In basic terms, the way in which such a staggering sum was lost relates to the way in which gross remuneration fees, income tax and the share of the State partner was deducted and accounted for in the compensation paid out over reduced oil production levels. The sheer scale and scope of this corruption created the unwillingness of major Western firms to become too heavily involved in the country. In June 2021, U.K. oil super-major, BP, said it was working on a plan to spin off its operations in Iraq’s supergiant Rumaila oil field into a standalone company. The statement was highly reminiscent of the withdrawal of the U.K.-Dutch oil super-major, Shell, from Iraq’s supergiant Majnoon oil field in 2017 and of its withdrawal from Iraq’s supergiant West Qurna 1 oil field in 2018. Each of
Government floats tender to set up 4,50,000 ton green hydrogen production facility in India
Solar Energy Corporation of India (SECI) has floated a tender for setting up a production facility of 4,50,000 tonne of green hydrogen in India under the Strategic Interventions for Green Hydrogen Transition (SIGHT) scheme. SECI is a Government of India enterprise under the administrative control of Ministry of New & Renewable Energy (MNRE). It is a nodal agency for implementing various schemes for renewable energy in the country. According to the tender document, the total capacity available for bidding is 4,50,000 tonne per annum including 4,10,000 tonne under Technology Agnostic Pathways and 40,000 tonne under Biomass Based Pathways. The total capacity to be allocated under this tender is 450,000 tonne per annum of green hydrogen (GH2), it stated. It provided that a bidder, including its parent, affiliate or ultimate parent or any group company shall submit a single bid undertaking to set up a GH2 production facility. The projects shall be quoted in multiples of 500 tonne only, it stated
India explores building liquefaction units in Iraq to convert flared gas into LNG
India has initiated exploratory talks with Iraq to assess the possibility of building facilities to liquefy natural gas that is flared at the West Asian country’s oil and gas facilities, and transporting it as liquefied natural gas (LNG) to India, a senior government official said. The proposal came up during last month’s India-Iraq Joint Commission Meeting in Delhi. India already has strong ties with Iraq, particularly in energy trade with Baghdad being a top source of Delhi’s crude oil imports. Put simply , gas flaring refers to burning of unwanted and unutilised associated natural gas that is produced during oil production and other processes in the oil industry. A major oil and gas producer, Iraq is one of the biggest gas flaring countries as it lacks facilities to capture and process the gas to convert it into fuels or export it as LNG. Iraq flares a lot of gas and we are a large importer of gas. So, we are exploring if our companies can set up plants in Iraq to liquefy that gas into LNG,” said the official, who did not wish to be identified. As per estimates by global agencies, Iraq flares around 50 million standard cubic metres per day (mscmd) of natural gas. In 2022-23, India’s LNG imports stood at 19.9 million tonnes, which is equivalent to 71.6 mscmd of natural gas. The official quoted above however, did not name the Indian companies that may be looking at building liquefaction facilities in Iraq. The estimated timelines are also not clear, considering various impediments, particularly the security situation in Iraq.
Insulating consumers from oil price gyrations key for India’s demand growth: minister
India’s oil and gas consumption is growing at a rapid pace and to ensure that the upward trajectory is sustained it is crucial that domestic consumers remain insulated from surging international oil and gas prices, petroleum minister Hardeep Singh Puri said. “While we talk about growth, we have been mindful of inflation and prices. We have successfully insulated the common man from the surge in international prices, and our policies have ensured sustained availability of fuel at the most reasonable prices,” Puri told a recent industry seminar. Latest data from the Petroleum Planning and Analysis Cell showed that India’s oil demand rose 5.7% year on year to 116.44 million mt, or 5.1 million b/d, in the first half of 2023. India’s diesel demand rose 7.4% in the first half of 2023 from the same period in 2022, while gasoline demand rose 8.2%. Demand for jet fuel and naphtha rose 24.4% and 6.4%, respectively, over the same period. “Refining activities are expected to be robust in the second half of the year, driven by strong domestic demand,” said Sumit Ritolia, refinery economics analyst at S&P Global Commodity Insights. “As we enter the second half of the year, demand typically increases with the start of the festive and wedding season. Additionally, in the first and second quarters of 2024, India will have its central election, and the government is placing significant focus on infrastructure activities, further driving increased demand and consumption,” he added. Economic outlook brightens Puri quoted World Bank’s prediction for a robust 6.3% GDP growth rate for India in 2023-24 (April-March), saying it was a reflection of the country’s robust economic fundamentals. “Our growth, undeniably, has been fueled by our voracious energy consumption, a by-product of rapid urbanization and industrialization,” Puri said, adding that a quarter of the global energy demand growth between 2020 and 2040 was projected to originate from India. “We have not merely survived, but thrived, with the highest growth rate amongst the top five economies worldwide. Even in the face of global slowdown, we are projected to contribute to around 15% of global growth in 2023,” Puri added. As the economy continues to outshine on the global stage, the petroleum sector will continue to play a crucial role in fueling the country’s growth, the minister said. “A growth-energy correlation is manifestly visible as India stands today as the world’s third-largest energy consumer, the third-largest consumer of oil, the third-largest LPG consumer, the fourth-largest LNG importer, the fourth-largest refiner, and the fourth-largest automobile market in the world,” Puri said. He said that New Delhi’s resolve to bring reforms in the energy sector is unwavering, and the cabinet’s recent approval of critical gas pricing reforms is testament to this commitment. “The benefits of these reforms have helped the public, with a noticeable reduction in the average cost of piped natural gas and compressed natural gas,” the minister said. India said in late March that a unified tariff for all interconnected gas transmission pipelines owned and operated by authorized entities — Indian Oil Corporation Limited, Oil and Natural Gas Corporation Limited, GAIL (India) Limited, Pipeline Infrastructure Limited, Gujarat State Petronet Limited, Gujarat Gas Limited, Reliance Gas Pipelines Limited, GSPL India Gasnet Limited and GSPL India Transco Limited — came into effect April 1. The crucial reform has been hailed by many market participants as positive, with the reform set to usher more price transparency, boost gas-related infrastructure, and provide access to remote areas. Supply diversification Puri said India was taking crucial strides towards diversifying its energy supplies and increasing the share of alternate energy sources like biofuels, ethanol and CBG. It was also boosting domestic oil and gas production, as well as setting new energy targets through electric vehicles and hydrogen. “We have diversified our import basket from 27 countries in 2006-07 to 39 in 2023,” Puri said. He added that India increased its ethanol content in petrol from 1.53% in 2013-14 to more than 11.5% by March 2023. India has set a roadmap for ethanol blending, with the aim to achieve a blend comprising 20% ethanol in petrol by fiscal year 2025-26. Puri said E20 was rolled out on Feb. 8, ahead of its April target. The number of outlets retailing E20 stood at almost 600 and will cover the entire country by 2025. “We are relentlessly pursuing these initiatives and targets with the belief that it will usher in a new era of sustainable and secure energy for India, bolstering our economic growth while safeguarding the environment for our future generations,” Puri said.