BEIRUT

Regional

Iraq star rises in OPEC as embargo hurts Iran

FILE - An employee works at the Tawke oil fields in the semiautonomous Kurdish region in northern Iraq. (AP Photo/Hadi Mizban, File)

Iraq jumped two places to No. 2 in OPEC’s rankings this year, cementing its position among the world’s leading oil producers. Neighboring Iran dropped three spots to 5th as international sanctions took hold.

Second only to Saudi Arabia within the Organization of Petroleum Exporting Countries, Iraq’s output rose by 24 percent this year as the BP Plc-led Rumaila field increased supply. Iranian production shrank by the same percentage to the lowest level since 1988, data compiled by Bloomberg shows, and its exports will continue to drop into 2013, according to the International Energy Agency.

“Iraq will continue to produce as much crude as it can because oil is and will remain its main source of income in the next few years,” said Anas Alhajji, chief economist for NGP Energy Capital Management LLC in Irving, Texas, which oversees $13 billion in funds. “Iraq wants every penny it can get.”

The turnaround illustrates the nations’ contrasting geopolitical fortunes. Iraq has become the region’s second-fastest growing economy, attracting investment from Royal Dutch Shell Plc and OAO Lukoil in the nine years since the ouster of Saddam Hussein. Iran, stymied by a European Union and U.S. ban on oil exports, will suffer a decline in gross domestic product this year, according to the International Monetary Fund.

Iraq’s crude production averaged 3.35 million barrels a day last month, Bloomberg data shows Iran’s daily output slumped to 2.7 million, less than Venezuela and Kuwait, OPEC’s third- and fourth-largest producers.

The reliability of Iraqi exports is still at risk as the central government in Baghdad and the Kurdistan Regional Government fail to agree on crude revenue and contract terms. Exxon Mobil Corp. wants to sell its stake in the West Qurna-1 field in southern Iraq, Oil Minister Abdul Kareem Al-Luaibi said Nov. 11.

“Constraints on export pipelines, government bureaucracy, and the continuing dispute with the autonomous Kurdish region will keep the country short of its ambitious goals,” Robin Mills, the head of consulting at Dubai-based Manaar Energy Consulting and Project Management and a former Middle East specialist at Shell, said in a Dec. 26 email.

Global oil supply has risen this year, led by the U.S., where producers are using hydraulic fracturing, or fracking, to unlock deposits in shale formations from North Dakota to Texas and Oklahoma. Production worldwide averaged 90.8 million barrels a day in the third quarter, up 2.7 percent on 2011, the Paris-based IEA said in its monthly report on Dec. 12.

Output among OPEC members rose to a four-year high in August, a month after the EU banned imports of Iranian crude, as members sought to benefit from Brent prices at more than $100 a barrel.

Brent, the benchmark for more than half the world’s crude, is poised for a fourth annual gain after averaging a record $111.66 a barrel this year on the ICE Futures Europe exchange. West Texas Intermediate futures, the most-traded U.S. grade, is set to drop this year for the first time since 2008 in New York after rising domestic output bolstered inventories at Cushing, Oklahoma, the nation’s biggest storage hub. WTI averaged $94.19 a barrel this year.

“Everyone is high maintenance these days,” said Mehdi Varzi, a former Iranian diplomat and director of Varzi Energy Ltd., an energy-consulting company. “The major players all need high oil prices for their own reasons.”

Libya’s production more than doubled in 2012 as operators including Total SA returned to the North African nation after last year’s rebellion against Moammar Gadhafi, lifting the nation’s position among OPEC’s 12 members to 9th from 11th.

 
A version of this article appeared in the print edition of The Daily Star on December 29, 2012, on page 4.

Recommended

Advertisement

Comments

Your feedback is important to us!

We invite all our readers to share with us their views and comments about this article.

Disclaimer: Comments submitted by third parties on this site are the sole responsibility of the individual(s) whose content is submitted. The Daily Star accepts no responsibility for the content of comment(s), including, without limitation, any error, omission or inaccuracy therein. Please note that your email address will NOT appear on the site.

comments powered by Disqus

Advertisement

FOLLOW THIS ARTICLE

Interested in knowing more about this story?

Click here