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Axelrod Energy Projects LLC 1.

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Presentation on theme: "Axelrod Energy Projects LLC 1."— Presentation transcript:

1 Axelrod Energy Projects LLC 1

2 Outlook for Iraqi Crude Oil Production and Exports Muayyad Al-Chalabi Axelrod Energy Projects LLC Columbia University School of International and Public Affairs December 3, 2012

3 Axelrod Energy Projects LLC Overview Brief history of the Iraqi oil sector Iraqi reserves Development contracts Infrastructure development Challenges – Internal – External Conclusion 3

4 Axelrod Energy Projects LLC Brief history of Iraqi oil sector 1912: Establishment of the Turkish Petroleum Company to negotiate an oil concession from the Ottoman Empire 1920: TPC receives concession from the British Mandate in Iraq. 1927: Oil struck near Baba Gurgur. Broad international participation in the TPC. – 75 year term for exploration rights – Iraqi government would receive royalties on production, but royalties contingent on oil company profits, and not payable for the first 20 years 1930: 70-year concession negotiated by the Iraq Petroleum Company (IPC) 1932: British mandate ends, but Hashemite monarchy maintains a pro-western stance. 4

5 Axelrod Energy Projects LLC Brief history (continued) 1951: Mossaddegh nationalizes oil operations in Iran. British led embargo on Iranian oil. Mossadegh overthrown in 1953. 1958: Hashemite Kingdom overthrown by Abd al-Karim Qasim 1959: Qasim withdraws Iraq from Baghdad Pact 1960: Iraq helps found OPEC. Qasim threatens legislation to revoke a large portion of the concession granted to the IPC. 1963: Qasim ousted in Ramadan Revolution. 1968: Ba’ath Party rises to power. 1972: IPC nationalized 5

6 Axelrod Energy Projects LLC Brief history (continued) 1979: Saddam Hussein assumes presidency 1980–1988: Iran-Iraq War 1990–1991: Gulf War I. – 1990–2003: Sanctions on Iraq. No-fly zones enforced. – 1995–2003: UN Oil-for-Food Program 2003–2011: Gulf War II – 2007: The military surge 6

7 Axelrod Energy Projects LLC Iraq oil production (1958-2012, kb/d) 7

8 Axelrod Energy Projects LLC Iraq proven oil reserves Iraq Historical Proven Reserves (billion barrels) Oil Reserves in the ME by Country (million barrels) Country2012 Saudi Arabia264,520 Iran151,170 Iraq143,100 Kuwait101,500 UAE97,800 Qatar25,380 Oman5,500 Syria2,500 Yemen3,000 8

9 Axelrod Energy Projects LLC Iraqi oil fields FieldsRegionReserves (bbl) West QurnaSouth43.0 RumailaSouth17.0 MajnoonSouth12.6 KirkukNorth8.6 East BaghdadMiddle8.1 HalfayaSouth4.1 ZubairSouth4.0 MissanMiddle2.5 Bai HassanNorth2.3 NajmahNorth0.9 GharafMiddle0.9 QayarahNorth0.8 Other 38.2 Total 143.0 9

10 Axelrod Energy Projects LLC Oil Development Contracts TypeOwnership of Extraction Rights Ownership of Production ConcessionIOC Joint Venture Shared Production Sharing StateShared Services Contract State Iraq model contract – 20 year service agreement – Government has 25% stake in operating company, IOCs have remaining 75% stake – Government pays the operating company a fixed fee of ~$2 per barrel for oil produced. – IOC not granted exclusive rights to either exploration or production 10

11 Axelrod Energy Projects LLC Iraq oil development contracts First Round (2009) FieldRegionIOCPPT (kb/d) RumailaSouthBP, CNPC1,750 West Quarna SouthEM, Shell600 ZubairSouthENI, Occidental, Kogas 400 MisanSouthCNOOC275 Second Round (2010) FieldRegionIOCPPT (kb/d) MajnoonSouthShell, Petronas 1,800 HalfayaSouthCNPC, Total, Petronas, 535 QaiyarahNorthSonangol120 West Qurna (II) SouthLukoil, Statoil 1,800 GarrafSouthPetronas, Japex 230 BadraEastGazprom, Kogas, Petronas, TPAO 170 NajmahNorthSonangol110 11

12 Axelrod Energy Projects LLC Infrastructure expansion Pipeline overhaul and construction – Construction of new on-shore pipelines (6,000 km) – Construction of new off-shore pipelines (300 km) Oil storage expansion – Final storage capacity of 60 million barrels – Add 20 million barrels to existing facilities – Build new tank farms with 30 million barrels Common seawater supply facility (12-15 mb/d) 12

13 Axelrod Energy Projects LLC Pipeline infrastructure 13

14 Axelrod Energy Projects LLC Loading terminal infrastructure Loading terminal expansion – Final capacity of 4.8 mb/d – Expand existing loading terminals with an additional capacity of 1.6 mb/d – Construct 4 new single point moorings (SPMs) with a total capacity of 3.2 mb/d 14

15 Axelrod Energy Projects LLC Iraq crude oil production In July 2012, Iraq becomes second largest producer of oil in OPEC at 3 mb/d Robust production growth since 2007 – Improved security environment since 2007 – IOC investments since 2009 Iraqi government officially projecting 12 mb/d by 2017. – By comparison, Saudi Arabia’s total production capacity is 12 mb/d, with actual production between 8-10 mb/d. – Production targets written into contracts with IOCs total 8.8 mb/d. 15

16 Axelrod Energy Projects LLC Iraq oil production and exports Robust production growth Domestic demand – Small domestic refining capacity – No new domestic refining capacity expected until 2019 – Small domestic power generation demand Any additional crude production to be exported Iraq oil production and exports (kb/d) 16

17 Axelrod Energy Projects LLC Internal challenges Lack of a comprehensive hydrocarbon law Dispute with the Kurdistan Regional Government – KRG has its own hydrocarbon law, and has negotiated independent contracts with IOCs on that basis Baghdad has banned IOCs doing business with the KRG from bidding on any future contracts KRG territory 17

18 Axelrod Energy Projects LLC External challenges OPEC production quotas – Iraq exempt since 1998 – Iraq’s production quota has been absorbed by Saudi Arabia, the UAE, Venezuela, and others – Iraq set to reenter the production quota system in 2014. – Conflicting interests Need to maintain prices (total production quota cannot rise significantly). Iraq needs $90 per barrel crude in order to meet budgetary requirements. Need to carve out a space for Iraq in the production quota system 18

19 Axelrod Energy Projects LLC External challenges Historical rivalry with Iran – Growth in Iraq oil exports has gone to fill the gap left by sanctions on Iran – Iran is currently the number two country (both in terms of reserves and production quota) in OPEC – Traditionally, Iran has maintained parity with Iraq in OPEC. – Currently cooperative relationship with Iran may deteriorate rapidly if Iraqi production and exports grow rapidly – Iran has effective control over the Straight of Hormuz Security of pipeline routes to the Mediterranean – Kirkuk-Ceyhan pipeline is frequent target for Kurdish separatists. – Pipeline to Syria will not materialize in the short run – Pipeline through Jordan makes no strategic difference. 19

20 Axelrod Energy Projects LLC External challenges Softening demand – Slow growth in European markets – Slowing growth in Asian markets Rising supply in North America Shale oil backing out imported conventional oil North America moving towards energy independence 20

21 Axelrod Energy Projects LLC 21

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