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IEA special report on Iraq


The IEA published its Iraq Energy Outlook special report yesterday, with projections to 2035. Under the 'Central Scenario', the key highlights for the world’s third largest oil exporter are:

Production doubles to 6.1mmb/d by 2020 and reaches 8.3mmb/d by 2035, with Iraq becoming the world’s second largest exporter, having overtaken Russia.

Iraq begins exporting natural gas by 2020, with export levels reaching 20bcm/a by 2035.

At least USD 530bn of cumulative investment in energy infrastructure is required by 2035, with the bulk of the investment in upstream oil. The current decade has the highest annual investment requirement.

The less probable 'High Case' has oil production exceeding 9mmb/d by 2020 and rising to 10.5mmb/d by 2035. The report identifies the timely availability of rigs, sufficient water for injection and adequate storage, transportation and export capacity as critical to meeting projections (particularly the High Case).

Returning to the present, OPEC production appears to have eased somewhat in September, with Argus estimating output at 31.3mmb/d and MEES and PIW at 31.5mmb/d. Maintenance work in Angola is cited as a key contributor to the decline, as is further supply disruption in Nigeria.

Iranian production might be showing signs of stabilising, with one journal showing a 100kb/d pickup in production. Exports to Japan resumed after no deliveries in July (+100kb/d MoM), while exports to China fell (-80kb/d MoM). It is worth noting that, since the beginning of the year, Japan’s proportion of Iranian crude imports relative to total imports has fallen sharply , while for China this has remained relatively stable and not inconsistent with prior year levels (the dip in early 1H12 is believed to be related to commercial negotiations).

Saudi production remains around the 10mmb/d level.

OPEC publishes its Monthly Oil Market Report and the EIA its Short-Term Energy Outlook later today, while the IEA, arguably the most authoritative of the major external forecasters, publishes its Oil Market Report on Friday. We expect OPEC and the IEA reports to re-affirm that the market is being oversupplied and see downside risk to oil prices. Meanwhile, Saudi Oil Minister Ali al-Naimi was quoted yesterday stating that Brent is “still high”, that “we will work towards moderating the price”, and he reiterated the kingdom’s desire for USD 100/bbl oil. 

Colin Smith, Marc Jacouris
VTB Capital analyst

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