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Iraq nears production capacity of 5 million b/d but says OPEC cuts should continue

Iraq is nearing a production capacity of 5 million b/d, though it will comply with its quota under the OPEC production cut agreement, oil minister Jabbar al-Luaibi said Saturday.

The Islamic State militant group had destroyed about 70% of Iraq’s oil infrastructure in the north and set fire to 65 wells, Luaibi said, but with the militant group driven out of the country, Iraq is quickly rebounding.

“They did a lot of damage, but… Iraq’s oil industry is progressing very fast,” he said at an Atlantic Council energy forum in Abu Dhabi, which was webcast.

Iraq produced 4.41 million b/d of crude in December, according to the latest S&P Global Platts OPEC survey.

Some 300,000 b/d of Iraqi production in the northern Kurdistan region remains offline, in the wake of a failed independence referendum last fall.

Eventually, Iraq aims to hit 7 million b/d, he said.

Iraq is also close to signing three contracts with international gas companies, which he declined to name, to produce 950 million cubic feet, as part of the country’s efforts to eliminate associated gas flaring by 2021, Luaibi said.

Iraq’s December crude production figure is above its quota under the OPEC production cut agreement of 4.351 million b/d, which it has consistently exceeded, according to Platts survey data.

Nevertheless, Luaibi said Iraq is “certainly in full compliance with [its quota], and we have not deviated an inch from the declaration… We still comply with the OPEC declaration and the level that was set.”

Luaibi has complained that OPEC’s six independent sources used to monitor production, including S&P Global Platts, have incorrectly estimated Iraq’s output levels — first for being too low when the deal was being negotiated in late 2016 and more lately for being too high.

Iraq’s State Oil Marketing Organization on Wednesday pegged Iraq’s December production at 4.362 million b/d.

Luaibi said Iraq supports continuing the OPEC production cut agreement through the end of 2018, as planned, amid speculation that the organization could dissolve the pact if oil prices remain high.

Iraq’s State Oil Marketing Organization on Wednesday pegged Iraq’s December production at 4.362 million b/d.

Luaibi said Iraq supports continuing the OPEC production cut agreement through the end of 2018, as planned, amid speculation that the organization could dissolve the pact if oil prices remain high.

The deal calls on OPEC and 10 non-OPEC countries led by Russia to cut a combined 1.8 million b/d to stabilize oil prices.

“Overall, the results are satisfactory,” said Luaibi, who had sought an exemption from the cuts as they were negotiated due to Iraq’s need for revenue to fight the Islamic State.

“Iraq is in full agreement with OPEC members that the freeze should continue,” he said. “The market is stabilizing but it’s not 100% stable. You cannot say everything is rosy.”

–Herman Wang, herman.wang@spglobal.com

–Edited by Maurice Geller, maurice.geller@spglobal.com

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