Iraq’s Oil Output Quota May Become OPEC’s ‘Hot Iron’

Iraq’s plan to boost oil output with the help of foreign companies may upset the OPEC's efforts to support prices because the nation has no quota to limit its production.

Oil companies including Royal Dutch Shell Plc, BP Plc and OAO Lukoil may help Iraq meet a target to boost oil output capacity to 12 million bpd in the next six years after winning oil licensing rounds earlier in 2009.

Oil has gained 64% since the beginning of 2009, when OPEC output cuts agreed late-2008 took effect, and is currently at about US$73 a barrel. The group left production targets unchanged at a meeting in Luanda, Angola on 22 December 2009.

“In the next couple of years Iraq is expected to come back with more oil and obviously it needs the other members to make space for them,” Johannes Benigni, chief executive officer of JBC Energy, said in a Television interview. “With prices at US$75 everyone is happy and no one needs to touch the hot iron, but down the line, obviously, everyone sees this issue coming up.”

Iraq, holder of the world’s third-largest oil reserves after Saudi Arabia and Iran, aims to boost production from about 2.4 million bpd. The Persian Gulf state offered almost a third of its reserves in the second license round as it seeks to rebuild its economy after almost a decade of conflict and sanctions. OPEC Secretary-General Abdalla el-Badri said he doesn’t expect Iraq’s output to increase for five to six years. - Bloomberg