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New Market Study Published: Iraq Oil & Gas Report Q2 2014

New Energy research report from Business Monitor International is now available from Fast Market Research

 

Boston, MA -- (ReleaseWire) -- 04/09/2014 -- While the start of major upstream projects over in the coming quarters highlights Iraq's potential, volatile production, a challenging security situation and unresolved issues with the Kurdistan region underscore the country's challenges. Although we expect strong growth in both oil and gas output over the course of our forecast period, we expect delays and setbacks to continue, causing production to underperform in light of the country's raw potential. A resolution to the political situation between Baghdad and Erbil will be a key challenge to achieving production targets and long-term growth, particularly with new export infrastructure from Kurdistan to Turkey in place.

We highlight the following trends and developments in Iraq's oil and gas sector:

- Escalation of instability has partially impacted exploration and production efforts as spillover from the conflict in Syria is impacting western Iraq. While most of the oil production is in the more secure southern and northern regions of Iraq, the Kirkuk-Ceyhan pipeline has been a major target for insurgents, being attacked 54 times in 2013. This considerably restrained Iraq's production output to Turkey, and will likely continue to be targeted as the Syrian conflict shows few signs of ending.
- Kurdistan appears to have completed a 300,000 barrel per day (b/d) pipeline connecting its oil fields to Turkey. The pipeline by-passes the Baghdad controlled monitoring station in Fishkabur. In January 2014 a packet of oil was sent to the storage facility at Ceyhan in Turkey, with the Turkish energy minister confirming the arrival of 425,000 barrels (bbl). Baghdad has threatened to take legal action against any purchaser of the oil, which has seen it unsold as of the time of writing. We do not believe companies or countries are willing to take the risk of buying this oil without the approval of Baghdad, due to potential retribution through blacklisting or expulsion from contracts in Iraq.
- With export infrastructure linking oilfields in Kurdistan with Turkey independent of Baghdad's monitoring now in place, a solution to the political situation between Erbil and Baghdad is increasingly necessary. Budget talks, which cover Erbil's oil export requirements and share of the national budget, continue. Despite reports of a 'convergence' on key issues, neither side appears to be willing to make the necessary compromises to arrive at a sufficient pragmatic solution to benefit Iraq. We believe that with export infrastructure in place and a growing strain on Iraq's national budget, a solution to the differences is more important than ever. Continued disagreement will only work to provide a downside outlook to Iraq's oil and gas production forecast.

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