CERA: Former Iraqi oil minister sees hurdles in Iraq's oil future

Feb. 25, 2003
Issam al-Chalabi, former Iraqi oil minister, said Iraq's oil industry must first deal with its country's domestic politics, wars, and economic setbacks of past decades before developing a new and revitalized oil sector.


By OGJ editors
HOUSTON, Feb. 25 -- Issam al-Chalabi, former Iraqi oil minister, said Iraq's oil industry must first deal with its country's domestic politics, wars, and economic setbacks of past decades before developing a new and revitalized oil sector.

His remarks came in a special report for Cambridge Energy Research Associates' clients. CERA is a large consulting group based in Cambridge, Mass.

"A consensus on the role of the state oil company and international companies will need to be worked out. International oil companies (IOCs) will have a role in undeveloped fields because the demand for technology and investment will be way beyond what can be marshaled domestically," the report said.

Development contracts negotiated since 1991 probably will be addressed on a case-by-base basis, Al-Chalabi said. One possible scenario involves teaming up the holders of existing contracts with Iraqi private firms and international oil companies.

Oil potential
Noting that Iraq is one of the least explored among the rich oil countries, Al-Chalabi said 526 known structures have been discovered, delineated, mapped, recorded, and classified as prospects, but only 125 have been drilled.

Specifically, there are only 15 developed fields out of 73 discovered fields, he said. Oil was discovered in 1927, but its full potential was not explored for many years. Up until 1961, proven reserves were estimated at 34 billion bbl.

The Iraq-Iran war limited exploration activity during the 1980s, and there has been almost no activity since 1990, Al-Chalabi said.

"Large parts of the country remain untapped and wait to be explored and developed," he said, adding Iraq has the potential to produce 4.7 million b/d more oil from discovered fields that are ready to be developed.

Production, export capacity
Al-Chalabi recommended that current producing fields, with a capacity of 3.5 million b/d, should continue to be developed by state-owned Iraq National Oil Co. with technical and service assistance from international companies.

"Another factor to bear in mind is the benefit of the low cost involved in finding, developing, and operating Iraqi fields. The oil could well be the cheapest in the world, which will prove an attraction for IOCs compared to other ventures in neighboring counties," he said.

Al-Chalabi say he believes talk of raising production and export capacity to 8 million b/d is "premature."

"Iraq can, at some future point, consider a production target of around 8 million b/d, but only after reaching the earlier target of 6 million b/d, after 2010 at the earliest," he said.

Future oil policy
The first task for Iraqi oil authorities is to return production capacity, which has been damaged by wars, sanctions, and poor operating practices, back to proper shape, he said.

"This will require much effort, funds, and technical assistance. Parallel efforts will be needed to upgrade production capacity and ensure the export facilities for them, including the reopening of the Iraq-Saudi pipeline system and the rehabilitation of the country's (Persian) Gulf export facilities," Al-Chalabi said.