Iraq Accelerates This Oil Megaproject To Meet 7 Million Bpd Production Target
Even before the latest potentially game-changing developments began involving its longtime financial, political, and military ally Iran, it was clear that Iraq needed to focus more on the independent development of its own resources — most notably in energy — for its future. In the weeks leading up to the Western-backed Israeli attacks on Iran, the U.S. removed the longstanding waivers that allowed Iraq to keep importing electricity and gas from its neighbour to power 40% of its grid and rolled out new sanctions aimed at cutting Baghdad’s support for Tehran. For years, Iraq has been talking about increasing its oil production to various figures – 6 and bit million barrels per day (bpd), 7 and a bit million, 8 and a bit million– whatever; they have all amounted to nothing. Now though, Baghdad will need to start doing something to achieve these increases. So, can it meaningfully increase its oil production, and will it do so? Theoretically, Iraq has the natural resources to increase its oil production to way above the current average of just over 4 million bpd. Iraq officially holds 145 billion barrels of proved crude oil reserves (nearly 18% of the Middle East’s total, and the fifth biggest on the planet). Unofficially, it likely holds much more oil than this, with the Oil Ministry stating in October 2010 that its undiscovered resources amounted to around 215 billion barrels. This number had independently been arrived at back into 1997 by highly respected oil and gas firm, Petrolog. That said, the figure did not include the parts of northern Iraq in the semi-autonomous region of Kurdistan. With conservative estimates for these included, the International Energy Agency underlined that Iraq’s ultimately recoverable resources totalled about 246 billion barrels of crude and natural gas liquids. Given this, the ‘Integrated National Energy Strategy’ (INES) report of 2012 that was funded and developed by the World Bank, with further assistance from management consultancy firm then-Booz & Company, identified three realistic future oil production scenarios, as analysed in full in my latest book on the new global oil market order. These showed how the country could increase its oil output to either the ‘Low Production’ scenario of 6 million bpd by 2025, the ‘Medium Production’ scenario of 9 million bpd by 2020, or the ‘High Production’ scenario of 13 million bpd by 2017. A combination of indolence on the part of some of those in charge of Iraq’s oil strategy and corruption from others in the corollary political apparatus meant years of little tangible progress being made on any of these scenarios. It also eventually resulted in the withdrawal of many Western firms from Iraq that could effect such significant oil output increases, as repeatedly detailed by OilPrice.com. At that point onwards, it had become increasingly clear that the intention of the Federal Government of Iraq in Baghdad (and its key backers China and Russia) was to push the West out of a unified Iraq, having subsumed the northern semi-autonomous Kurdistan region into the rest of the country. However, given this scenario, the U.S. and its allies have pushed back with the opposite agenda, as also analysed in full in my latest book. To put it plainly: the U.S. and its key allies ultimately want to the northern Kurdistan region of Iraq to terminate all links with Chinese, Russian and Iranian companies connected to the Islamic Revolutionary Guards Corps over the long term. This could then be used as a bridgehead to reassert the West’s influence in the rest of Iraq through big investment deals firstly and then related infrastructure developments. On the other side of the equation, China and Russia have long been behind the idea of rolling the Kurdistan Region into the wider Iraq and keeping the West out forever. As a senior political source in Moscow exclusively told OilPrice.com many months ago: “Iraq will be one unified country and by keeping the West out of energy deals there, the end of Western hegemony in the Middle East will become the decisive chapter in the West’s final demise.” The West’s recent strategic push in this context has seen not just the US$25bn five-oil field development by the U.K.’s BP in the north of the country around the Kurdistan Region announced but also the US$27 billion four-pronged deal by France’s TotalEnergies in the south of the country as well. Several other deals by Western firms are in the making too, all of which are aimed at preventing the final move of Iraq into the China-Russia sphere of influence and eventually reversing it. Indeed, May 19 saw two deals signed by U.S. firms HKN Energy, and WesternZagros, to develop two fields – the Miran gas field and the Topkhana oil and gas field — in the Kurdistan area. U.S. Energy Secretary Chris Wright made it very clear about the deeper intention behind these deals, saying that they align with the administration’s broader strategy of striking commercial deals with allies to counter Iran’s influence. By extension, given the extremely strong links between Tehran and Beijing and Moscow, this also means countering China’s and Russia’s influence across Iraq as well. More recently in this precise regard was the announcement that the Iraqi Drilling Company (IDC) is making steady progress on its project to drill 15 oil wells in the North Rumaila oil field, alongside the U.S.’s Halliburton and the Basra Energy Company, with the latter being wholly owned by BP and also PetroChina, for the time being at least. The entire Rumaila field – split into North and South — lies around 30 kilometres north of Iraq’s southern border with Kuwait and, together with Kirkuk, has produced around 80% cent of Iraq’s cumulative oil production to date. BP has long been in talks with Iraq’s Oil Ministry to push production up to 2.1 million bpd from the current circa-1.2 million bpd which, given the field’s estimated 17 billion barrels in proven reserves, should not be difficult. However, there is a catch – and this
Iran-Israel War Prompts China to Reconsider Russia’s Gas Pipeline Proposal
The war between Israel and Iran has spark worry about energy supply security in Beijing, and a greater interest in the Power of Siberia 2 pipeline—a project proposed by the Russian side, on which the Chinese side has been in no hurry to make a decision. The Wall Street Journal reported the news, citing unnamed sources close to the government in Beijing. The latter has been in two minds about the Power of Siberia 2, first, because it has been hard to agree with the Russian side on things like ownership and pricing and second, because China does not want to become over-reliant on a single source of oil and gas. Now, these concerns appear to have taken the back seat in the face of a fresh dose of Middle Eastern instability and energy supply uncertainty—especially in gas. Almost a third of China’s gas imports come as LNG from Qatar and the United Arab Emirates, the WSJ noted in its report, citing Rystad Energy figures. Russia, in turn, is China’s third-largest supplier of LNG, after Australia and Qatar. But it is China’s biggest pipeline supplier, via the Power of Siberia 1, with flows this year set to reach 38 billion cu m, according to S&P Global. This is the maximum capacity of the Power of Siberia 1, but the POS 2 will have a capacity of 50 billion cu m. This is a lot of gas with no geopolitical risk that could lead to spikes in prices. As for diversification, China also imports quite a lot of natural gas via pipeline from Turkmenistan. Russia also appears set to benefit from the risk to oil supply from the Middle East and more specifically Iran, the WSJ report suggested. China, which is essentially the only buyer of Iranian crude, is now reconsidering this reliance as well, following the latest developments in the Middle East. One way of reducing said reliance is by boosting oil purchases from Russia, according to analysts. Russia currently accounts for some 20% of China’s oil consumption.
How India uses underground caves to store crude oil for crisis
It is feared that Iran might attempt to disrupt the Strait of Hormuz amid the ongoing conflict with Israel and the US. This could result in supply shortages and a surge in oil prices, and impact India, the world’s top crude importer, like other buyers. Amid fears of a wider conflict following Israeli and US strikes on Iran, gas and crude prices have already soared. However, India is not exactly losing sleep over the fluctuations. As Petroleum and Natural Gas Minister Hardeep Singh Puri noted, India’s diversified crude supply sources and the fact that a significant portion does not pass through the Strait of Hormuz offer a level of cushion. What Puri didn’t refer to is that India’s comfort is further bolstered by its strategic crude oil reserves, stored in underground rock caverns at three key locations. India maintains several million metric tonnes of crude oil as part of its Strategic Petroleum Reserves (SPR) in rock caves or caverns in Andhra Pradesh, Karnataka, and Tamil Nadu.
GAIL to invest ₹8.44 billion in expanding gas pipeline capacity
State-owned gas utility GAIL (India) Ltd on Monday said it will invest ₹8.44 billion in expanding Dahej-Uran-Dabhol-Panvel natural gas pipeline capacity to meet increased energy demand. The DUPL-DPPL network, the name Dahej-Uran-Dabhol-Panvel natural gas pipeline network is referred to, currently has 19.9 million standard cubic metres per day capacity. This is being expanded to 22.5 mmscmd, GAIL said in a stock exchange filing. GAIL said the pipeline capacity will be added in three years. “Investment required (is) ₹8.44 billion,” it said. “It was approved by the Board of Directors of the company in its meeting held today i.e. June 23”. GAIL also said it has pushed back the completion scheme of its 1,702 km Mumbai-Nagpur-Jharsuguda pipeline projectfrom June 30, 2025 to September 30, 2025.