200 died in violence last week. The funding for the Iraq Awakening groups is being withdrawn......


I'd count on a big upsurge in oil production soon. Not unless al Malaki has a rabbit in his hat.

But the thing is, despite the popular opinion that iraq was on overt resource grab, not all of the iraqi oil will be bound directly for the US. So yes, it will increase the global production of oil vs. the Saddam era but I'm not sure how much of it will be guaranteed to get to us.

Are you certain about that? I'm not convinced of that at all.

May be a while yet....

Iraqi Oil Licensing Auctions Hit Trouble

I don't really see what the big integrateds like Exxon have to offer Iraq, unless Iraq immediately want to launch massive programs to increase production a lot.

They'd be better off with a national company supported by Schlumberger, Halliburton and the likes. And I say this as an Exxon shareholder.

Iraqi oil licensing round runs into trouble By SINAN SALAHEDDIN Associated Press Writer © 2009 The Associated Press, June 30, 2009, 11:56AM:
BAGHDAD — Iraq's hopes for an oil-revenue fueled postwar recovery suffered a sharp blow Tuesday as the foreign oil companies it counted on to help develop its vast reserves greeted the country's first oil auction in over 30 years with grumbles and just one deal.
Roughly a year in the making, the foreign licensing round was touted by Oil Minister Hussain al-Shahristani as a key step to boosting Iraq's oil output to 4 million barrels per day and raking in cash the government desperately needs after years of sanctions and the U.S.-led invasion in 2003 left its economy in shambles. …

Under the 20-year service contracts on offer, the companies would be paid a per barrel fee for any crude they produce in excess of a minimum production target. But the price requested by all the companies was at least twice as high — and in a couple of cases almost 10 times higher_ than what the oil ministry was willing to pay.
Two oil executives from different companies at the auction complained that Iraq was offering too little money given the prevailing security risks and political uncertainty. They also complained that they were not given enough time to revise their bids — sometimes as little as 15 to 30 minutes. Both spoke on condition of anonymity because of the sensitivity of the issue. …
AP

well to put it into perspective Texas has over one million oil wells Iraq has little over two thousand oil wells, Russia's total oil reserves is around 60 to 70 billion barrels and they are producing 9.2 million a day, Iraqs total oil reserves is around 115 billion barrels and they are only producing 2.4 million barrels a day, so i guess it all depends on the infrastructure and ability to extract the oil from the substrate, so they have a long way to go ide say about 8 to 10 years to max production and that is going at it full steam ahead

NPR yesterday morning..... Following a discussion about withdrawing from Iraq they made the statement that "with western investment and technology" Iraq could increase its production fourfold from 2.5 mbpd to 10 mbpd.

That damn irresponsible reporting. I wonder where the hell they got those numbers? I've never seen any reasonable assessment of Iraq being anywhere near that much less being able to produce as much as Saudi Arabia.

Idiots.

-G

Hat tip to memmel for posting this in another thread, but the juicy meat is on page 2 which he didn't quote:

Iraq oil auction dashes majors' bonanza hopes | Reuters



This is of crucial importance; this ruinous policy has been going on for almost two decades now, and will severely impact URR of these fields. Recently I came across another piece saying they were still injecting resid; here is one from 2005:

Derelict Plants Are Crippling Iraq's Petroleum Industry (NYT)



This has been going on since at least 1992: IRAQ - The Main Fields In The North. - Free Online Library



An excellent blog: Iraqi Reservoir Damage May Be Long-Lasting

Extreamly infromative there.

So many lives for that.

Why has no one done a proper audit on Iraqi reserves since the invasion? They are playing the same OPEC reserve numbers game as everyone else.

As someone who had the opportunity to review a couple of the fields on offer back in the oil for food campaign after Gulf War I, I'd like to point out that the rumors of extensive reservoir damage are just that, rumors.
Note that the bids in the round were two part....1. bid a dollar per bbl value that the contractor would like to walk away with on the incremental bbls and 2. what the increase in production or # incremental bbls is. I've seen the bids and in most cases the IOC's bid higher incremental production uptick than the Iraqi's were expecting but also higher dollar per bbl value. This suggests that the IOC's were not at all concerned about being able to "fix" the issues with the various fields.
From what I have seen the real issue with the Iraq fields is anisotropy. Most of the reservoir units are not ubiquitous in quality across the big fields. As an example in Kirkuk the really great Eocene-Miocene reefal reservoirs are only present in part of the field. The same can be said for East Baghdad and Rumaila.
Why were the blocks not awarded....simply because the IOC's feel that they can't make any money at the $2/bbl uptick the Iraqis are setting as a limit. Operating costs here are going to be absolutely horrendous, much of those costs associated with setting up appropriate security. Note that CNPC and it's partners bid $7 uptick for Kirkuk which speaks directly to the huge risk premium they see as being necessary.
My back of the envelope calculation suggests BP is going to at best breakeven on this venture. They possibly see this as a "foot in the door" approach. Note that for the very big IOC's they are driven to some extent not just by return on investment but also by reserve replacement. A company the size of BP needs huge additions in reserves each year just to offset production....not easy to come by in the world these days. Hence if they are driven by reserve replacement they might be willing to accept very crappy return on investment. It's all about the metrics that drive share prices.

Thanks for the input, rock. Do you think the IOCs might be playing up these rumors to up the ante a little? Also the links I provide show that these bad reservoir practices continue to this day, so this isn't peculiar to the Hussein days.

A very intriguing article on that blog I linked to is an interview with Jabbar Al-Luaibi, former head of SOC. His description of all the headaches and wrangling to keep production up fits a description I read recently about the goings on in Iraq, "holding things together with duct tape and rubber bands." Lots info here about field operations you'll take an interest in I'm sure.

There is no argument that there wasn't bad reservoir practices, but that isn't unique to Iraq. The industry is quite capable of producing from most reservoirs that have been abused by all manner of bad practice. Good example would be the Turner Valley oil field where early production in the first half of the twentieth century entailed blowing down the gas cap and hence underming the produceability of the reservoir. Recently companies have been using Nitrogen injection to assist in oil recovery with the ultimate recovery likely to not be much less than if they had reinjected the natural gas in the first place.

No doubt it is a real mess over there right now. Nothing that a few billion dollars of investment couldn't fix though.