IEA sees Iraq as game-changer for world oil markets

Despite challenges, Iraq’s energy sector holds the key to the country’s future prosperity and can make a major contribution to the stability and security of global energy markets, the International Energy Agency said Oct. 9.

A comprehensive review of the energy sector indicates that Iraq will make by far the largest contribution to global oil supply growth in coming decades, IEA said. Current production of 3 million b/d will more than double by 2020 and expand further to more than 8 million b/d by 2035.

Iraq becomes a key supplier to fast-growing Asian markets, mainly China, and the world’s second largest oil exporter by the 2030s, overtaking Russia, IEA said.

IEA executive director Maria van der Hoeven said, “This landmark study confirms the increasing importance of Iraq to the global energy system, highlighting the key role it is expected to play in meeting growing energy needs and the responsibilities it will assume as a strategic source of world oil supply. Put simply, this report shows that we all have an interest in Iraq realizing its potential and revitalizing its economy.

IEA chief economist Fatih Birol, main author of the agency’s report, said, “Success is not assured, and failure to achieve the anticipated increase in Iraq’s oil supply would put global oil markets on course for troubled waters.”

Catching up with rising demand for electricity is a critical domestic challenge, as prolonged power cuts are still experienced daily in many parts of the country. The report estimates that, if planned new capacity is delivered on time, electricity generation will meet Iraq's demand for power in 2015.

Natural gas can play a much more important role in Iraq’s future and a vital first step will be to reduce the amount of gas now flared. Once domestic needs are met, Iraq can also provide a cost-competitive source of gas supply to neighboring countries, to European markets and to Asia, the report said.

Meeting the anticipated levels of oil, gas and power supply over the period to 2035 will require more than $530 billion in energy investment in Iraq, with the annual investment need highest in the current decade.

However, Iraq stands to gain much more, almost $5 trillion in revenues from oil export in the same period or an average of $200 billion/year. Revenues of this magnitude can transform Iraq’s future prospects, with the potential to stimulate much-needed economic growth and diversification, IEA said.

To achieve these ambitions, Iraq will need strengthened institutions and human capacity, a stable regulatory framework and sound long-term strategies for the energy sector, and efficient, transparent management of revenues and spending.

IEA produced the Iraq Energy Outlook in cooperation with Iraq’s federal government, the regional and provincial governments and officials across many government bodies, including fact-finding visits by the IEA team to Baghdad, Erbil, and Basrah.

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