Iraq has no plans for a third oil auction

Iraq has no plans for a third oil auction

January 7, 2010

Oil Minister Hussain al-Shahristani said, denting expectations the country might offer up further acreage following two previous rounds. Contracts already awarded at two auctions this year should boost the country’s output to around 12 million barrels per day in six to seven years’ time from around 2.5 million bpd now. Some officials have suggested there could be another round, but Shahristani told reporters: “We have no plans to do so.” “We don’t really feel the urgency of going into new bid rounds and keep on building new capacity at this stage,” he said further. While Iraqi output should eventually soar, Shahristani did not anticipate any big output rise in the next two years. “We don’t expect Iraq’s production to increase significantly next year or even in 2011,” the minister told reporters ahead of a meeting of OPEC tomorrow in Luanda. After years of war and international sanctions eroded Iraq’s oil capacity, it is the only member of the 12-strong producer group that does not have an agreed OPEC production limit. Shahristani said he did not expect any discussion to give it an output target in 2010.

In response to a price crash that last year took oil to just above $30 a barrel, Opec agreed a record reduction in its overall supply curbs of 4.2 million bpd from September 2008 production. Compliance with the output cuts has slipped to around 60% from a peak of around 80% in April and a welter of oversupply has built up on the oil market. Concerns in OPEC about the excess have been allayed by the resilience of the oil price, which has held above $70, but some, including Shahristani, have said there is a need for improved discipline, even though they predict no formal output change. “What I’ll be requesting and I expect others to do also is for countries to observe their quota and not to flood the market with crude that there is no demand for,” he said. Shahristani said oil prices were high enough even for producers with high production costs, reported Reuters. “I would say a price between $70 and $80 would be reasonable for these producers. This is a price that will encourage others to invest in these marginal fields”.

Source: Upper Quartile