Troubles and temptations

New study reminds the world of Iraq's hydrocarbon potential, something still stifled by conflict.
By Stuart Matthews
Tue 01 May 2007 12:00 AM

On 9 May IHS, an industry consultant, releases its Iraq Atlas. The study is being promoted as a ‘unique overview of all known prospects and fields in Iraq'.

The numbers it quotes provide every reason for the Iraqi oil industry to be optimistic about its future. But equally, under the current circumstances, more pressing matters may keep the industry occupied.

The atlas estimates the country's oil reserves - always a difficult number to pin down - may be as high as 116 billion barrels, placing the country at number three in the world. It also estimates there could potentially be another 100 billion barrels of oil in the as yet unexplored western desert of Iraq. The study's authors say it ‘provides the highest and most accurate level of detail available to date of reserves field-by-field'.

"The market has not had access to this level of data and analysis on Iraq's oil reserves and production capabilities for many years," said Ron Mobed, president and chief operating officer of the energy segment of IHS, which recently opened an office in Dubai.

"Clearly, the sourcing of accurate data is invaluable in planning, negotiating and contracting for the rebuilding of Iraq's oil infrastructure. While a few companies may have selected data based on cooperative agreements, most are basing investigations of geological, cost and risk considerations on older and less detailed data.

"In 2007, the Iraqi government is expected to launch a bid round for 65 exploration blocks and 78 fields are also to be offered for development. The Iraq Atlas will help companies evaluate these blocks and fields quickly and accurately."

If the numbers are accurate then they confirm the strength of Iraq's oil position. Having the oil is one thing, being able to do anything with it is something else entirely. As UK weekly The Economist put it: "the announcement of a study that suggests that Iraq's oil reserves could be almost as large as those of Saudi Arabia, the world's leader, has come amid fresh evidence of the monumental difficulty of realising that potential."

Amid relentlessly grim news from the country, people involved in the local oil industry are becoming increasingly pessimistic about the future. An example came when Saadalla Al Fathi, an advisor for Dome Petroleum International, spoke with some passion about the state of Iraq's refinery sector at the recent ENOC-hosted Middle East Petroleum & Gas Conference.

"When I am asked what is the future of Iraq's refineries, there is an easy answer - there is none," he said. With a regional audience pleased to hear an open assessment of the situation, Al Fathi's discussion of the sector's difficulties was met with a standing ovation.

In the meantime the numbers continue to offer promise. The IHS study indicates that Iraq could have the potential to produce four million barrels a day. But this capacity estimate comes with two significant caveats from IHS. One is the obvious need for a stable political and civil environment. The second is the need for investment in the repair and modernisation of existing facilities, which can only be successful when security is assured. Until significant change encourages these things to happen, the reserves, however large and tempting, will remain where they are.

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