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Iraq and Iran plot oil revolution in challenge to Saudi Arabia

Iraq and Iran plot oil revolution in challenge to Saudi Arabia thumbnail

Iraq’s goal of pumping 9m barrels a day of crude could be a game changer for oil prices and British companies.

Iraq is poised to flood the oil market by tripling its capacity to pump crude by 2020 and is collaborating with Iran on strategy in a move that will challenge Saudi Arabia’s grip on the Organisation of Petroleum Exporting Countries.

“We feel the world needs to be assured of fuel for economic growth,” Hussain al-Shahristani, Deputy Prime Minister for Energy in Iraq told oil industry delegates attending a Chatham House Middle East energy conference.

Al Shahristani said on Tuesday that Iraq plans to boost its capacity to produce oil to 9m barrels a day (bpd) by the end of the decade as Baghdad rushes to bolster its economy, which is still shattered by war and internal conflict. Iraq was producing 3m bpd in December, according to the International Energy Agency.

Iraq’s intention to challenge Saudi Arabia’s status as the “swing producer” in the OPEC cartel could see a dramatic fall in oil prices if Baghdad decides to break the group’s quotas and sell more of its crude on the open market.

“It’s very difficult to predict actual world (oil) demand by 2020 because the world economy is unpredictable,” said Mr al-Shahristani.

British oil giants BP and Royal Dutch Shell are also poised to benefit from Iraq’s ambitious production plans. Both companies are already managing two huge oil fields in southern Iraq which are vital if Baghdad is to achieve its goal.

However, even if Iraq is able to achieve its target of boost production capacity it is unlikely to be able to put in place sufficient pipeline and port infrastructure to export the additional crude.

Iraq’s main export terminal for loading oil tankers at Al Faw near Basra will require billions of pounds worth of improvements in addition to the refurbishment of its pipeline network.

Iraq’s ambitious plan could see it clash increasingly with the regime in Saudi Arabia, which has used its influence in OPEC over the last decade to keep oil prices above $100 a barrel. Saudi itself is now under pressure to boost output to maintain market share. The kingdom pumped 9.8m bpd in December up by about 100,000 barrels from the previous month.

Experts say that attention within OPEC, which pumps 30pc of the world’s crude, could increasingly focus on compliance with more of the group’s members tempted to pump more barrels to protect their share of the market as the cartel grapples with the rise of US shale oil production.

OPEC agreed in early December to renew for six months its 30m bpd output cap for the first half of the year to keep prices above $100. However, quotas have in the past proved difficult for OPEC as a group to enforce without any binding penalties for over-producing. Since its restoration to OPEC following the 2003 Gulf War, Iraq has been excluded from the group’s quota system to allow its economy to recover but pressure is mounting for it to comply this year.

The International Monetary Fund this week warned that Iraq’s weak economy remains vulnerable to fluctuations in oil markets. Crude oil exports account for 93pc of government revenues. The IMF estimated that Baghdad required an average oil price of $106.1 per barrel in 2013 to balance its budget, up from $95 in 2011 because of higher spending.

Despite Mr al-Shahristani’s hopes for boosting Iraq’s energy sector there are severe concerns over security amid fears the country may again be slipping toward a civil war between Sunni and Shia Muslim factions.

In a further challenge to Saudi Arabia, which is mostly closed to international oil companies, Mr al-Shahristani revealed that Baghdad is working with Iran to help it attract investment ahead of the possible lifting of sanctions. Oil companies are understood to be queuing up to win Iranian oil deals.

“Iran has been in touch with us,” said Mr al-Shahristani. “They want to share our contracts model and experience.”

Combined, Iran and Iraq hold greater reserves of oil than Saudi Arabia and the potential with the help of international investment to match its capacity to produce oil, which currently stands at around 12.5m b/d of crude.

Telegraph UK

14 Comments on "Iraq and Iran plot oil revolution in challenge to Saudi Arabia"

  1. Northwest Resident on Tue, 28th Jan 2014 7:26 pm 

    The gods must have been in a joking mood when they put all that oil in the Middle East countries, along with a culture of intensive tribal and religious warfare that extends from the very beginnings of human history up to the present time. I’m sure they are up there somewhere in the clouds even now, laughing and rolling on the floor, saying “Here it is… Come and get it..”.

    “Iraq is poised to flood the oil market by tripling its capacity to pump crude by 2020.” All they need is significant investment to build sufficient pipeline and port infrastructure to export the additional crude — and a way to keep those Sunni and Shia Muslim factions from blowing each other and all the newly built pipelines up. Good luck with that.

  2. robertinget on Tue, 28th Jan 2014 7:55 pm 

    George W. Bush, later, Barack Obama made
    significant contributions delaying Peak
    Oil’s bifurcation. Ten, eleven, twelve years of war certainly helped support oil prices, slowed, almost stopped E&P,
    exports in Iraq.
    Years of Iranian dumb assed Sanctions knocked another million barrels off markets.

    One needs to ask, who benefited from removal of minimum, two million B p/d ?

    Another unintended consequence of Iraq
    and Iranian actual and cyber invasions
    are to drive these two into each other’s arms. Now, apparently, it’s payback time.

    I don’t believe for a second either Iraq or Iran are capable of doubling production much less tripling by 2020.
    This would be like forcing Iran’s
    child labor force to increase carpet
    production 300%, only harder.

    If you will never be an oil consumer, sit back and watch Saudi Arabia, Russia,
    Syria, Kuwait, Oman, Iran and Iraq tear each other new excretion points.

  3. DC on Tue, 28th Jan 2014 8:03 pm 

    The is ‘plot’ on is it? Funny though, I wonder just whose ‘plot’ exactly?

    Could it be, these guys?

    Q/British oil giants BP and Royal Dutch Shell are also poised to benefit from Iraq’s ambitious production plans. Both companies are already managing two huge oil fields in southern Iraq which are vital if Baghdad is to achieve its goal.

    This matters, a lot. Those fields used to be owned by the Iraqi people. The ‘liberation’ of Iraq however, has changed that. What little is left of Iraq, is now under western corporate management.

    Hey NWR, do you mind providing actual proof the ME has been marked by intensive tribal and religious war since the ‘beginning’. Or at least, show how they are somehow worse than say, us mighty whiteys? If your going to single all those ‘dirty arab’ as being particularly violent and war-prone types out it should at least square with reality-which it does not.

    Even more Ironic is the easily verifiable fact that some of the mankind’s oldest organized civilizations started in guess where NWR? Yea, Iraq. Its actually very difficult(impossible) to build complex civilizations when your engaged in ‘constant tribal and religious warfare’. Yet somehow, the ME region produced some of mankind’s oldest and earliest complex societies. So either your assertions are wrong, or world history is a massive hoax and world peace didnt break out until the US came along dropped a couple of its primitive WoMD on some yellow folks?

    Which is it?

    But they dont teach any of that in the United Snakes of War and coal do they?

  4. J-Gav on Tue, 28th Jan 2014 8:13 pm 

    There should be an incremental increase but no doubling or tripling of output from either country by 2020, as Robertinget notes. (Oh, learned a new term there too – “excretion point?”: not quite sure what it means but I’ll think on it. Could it be the point where the quantity of excreta produced in the world exceeds oil production)?
    One of the reasons for this is, as Northwest indicates, the existence of explosives. Another is the pressure which will be applied by other actors – it isn’t as if the Saudis, Qataris etc are just going to quietly fade back into the desert in the meantime …

  5. Northwest Resident on Tue, 28th Jan 2014 8:27 pm 

    Hey DC — “United Snakes of War and coal…”. Clever, verrry clever. Gotta hand it to you.

    You seem to think that you’re smart and well-informed, DC. But a little self-introspection and brutally honest self-assessment might benefit you.

    In answer to your question, here’s a couple of links to get you going.

    Why is the Middle East so at odds with modern life, laggard in everything from literacy to standard of living, from military prowess to political development?

    “A profound new book by Philip Carl Salzman, professor at McGill University, with the deceptively plain title Culture and Conflict in the Middle East (Prometheus), offers a bold and original interpretation of Middle Eastern problems.

    Tribal autonomy has driven Middle Eastern history, as the great historian Ibn Khaldun observed over six centuries ago. When a government faltered, large tribal confederations would form, leave their arid badlands and seize control of the cities and agricultural lands. Having seized the state, tribes exploited their power unabashedly to forward their own interests, cruelly exploiting their subject population, until they in turn faltered and the cycle started anew.”

    Another one:

    “Conflicts within the Middle East cannot be separated from its peoples’ culture. Seventh-century Arab tribal culture influenced Islam and its adherents’ attitudes toward non-Muslims. Today, the embodiment of Arab culture and tribalism within Islam impacts everything from family relations, to governance, to conflict. While many diplomats and analysts view the Arab-Israeli dispute and conflicts between Muslim and non-Muslim communities through the prism of political grievance, the roots of such conflicts lie as much in culture and Arab tribalism.

    Tribalism and Predatory Expansion

    Every human society must establish order if it is going to survive and prosper. Arab culture addresses security through “balanced opposition” in which everybody is a member of a nested set of kin groups, ranging from very small to very large. These groups are vested with responsibility for the defense of each member and responsible for harm any member does to outsiders. If there is a confrontation, families face families, lineage faces lineage, clan faces clan, tribe faces tribe, confederacy faces confederacy, sect faces sect, and the Islamic community faces the infidels. Deterrence lies in the balance between opponents. Any potential aggressor knows that his target is not solitary or meager but rather, at least in principle, a formidable formation much the same size as his.

    Balanced opposition is a “tribal” form of organization, a tribe being a regional organization of defense based on decentralization and self-help. Tribes operate differently from states, which are centralized, have political hierarchies, and have specialized institutions—such as courts, police, tax collectors, and an army—to maintain social control and defense.

    Understanding the influence of tribalism upon the development of both Arab culture and, by extension, Islam, requires acknowledging the basic characteristics and dynamics of Middle Eastern tribalism. Part of any tribesman’s job description is to maximize both the number of children and of livestock. There are practical reasons for this: First, children aid in labor. Nomadic pastoralism requires heavy physical work. Workers are needed to conduct many tasks simultaneously. Family members are more committed to common interests than individuals recruited for reciprocity or pay. Large families also enhance political stature. Because technology remains constant across tribal societies in any given area, the factor that determines military strength is how many fighters an individual can muster. The man who can call on five or six adult sons and a similar number of sons-in-law to support him is a force with which to reckon. Cultural values underline this emphasis on progeny. A man is not a man if he cannot produce children, and a woman is not really an adult if she does not become a mother.”

    You take from here, DC. There are thousands of links that prove the point — tribalism and tribal warfare is and has always been the “norm” in the Middle East countries — great civilizations of Persia, Egypt and Mesopotamia excepted.

  6. Davy, Hermann, MO on Tue, 28th Jan 2014 8:39 pm 

    More media hype about oil supplies. Iraq is close to a civil war I see little chance of more than a incremental increase. Iran has its own set of issues but is better poised to increase supply if it makes peace with the sanction issues. The oil is there so the bellow ground variables are in place. The above ground issues are daunting especially for Iraq. If we see the impending financial crisis intensify this will further restrict supply growth. The one bright spot in Iraq is the Kurds who are on their way to an independent petro state.
    DC, not sure your facts are right: What little is left of Iraq, is now under western corporate management. You are definitely wrong on this account. If anything the Iraqis will be exploiting the global investment players in their country.
    DC, – Hey NWR, do you mind providing actual proof the ME has been marked by intensive tribal and religious war since the ‘beginning’.
    Middle East is a powder keg, have you watched the news lately?
    DC, – But they don’t teach any of that in the United Snakes of War and coal do they?
    Are you feeling hateful? Please don’t beat the dog, your kids, and or the wife

  7. meld on Tue, 28th Jan 2014 9:02 pm 

    Won’t be so easy once Iraq splits into three states has a civil war and the insanely stupid ristrists figure out that all you have to do to bring down a nation is target its energy production rather than its cleaners and bus drivers.

  8. robertinget on Tue, 28th Jan 2014 9:04 pm 

    Nothing constructive will come of dialog if it sinks to personal invective.

  9. DC on Tue, 28th Jan 2014 9:35 pm 

    So, NWR, historically, speaking, besides the civilizations, which strangely enough constituted the vast majority of ME cultures that you so graciously exempted from your ah, analysis, arabs
    are all(essentially) tribal savages, got it.

    I know they dont teach real history in the empire there, but its also a fact, that western civilization is also been wracked by ‘tribal and religious wars’ of all types throughout most of our history as well. In fact, our list of dirty laundry from the christian dark ages, through to modern times puts makes arabs look like saints by comparison.(Which of course they are not).

    If you want bash arabs as being uncivilized savages, thats your business.There may have even been times and places where that label might be used with *some* justification. But don’t try to pretend history or even reality supports your thinly veiled racism and revisionism.

    In modern times, the entire area is under blanket assault and intervention by US and allied western nations. Their armies and intelligence agencies on the ground, actively sow instability and violence. So no, it does not surprise me, or anyone else things are so unstable in certain areas. Every single ME nation that the US has been spreading ‘peace and democracy’ (ie rule by US\allied oil corporations), is a living hell.

    Right now, probably one of the most stable nations in the ME, is Iran. Why? No US troops,no ‘security contractors, No IMF, no WB, no shah.

  10. Northwest Resident on Tue, 28th Jan 2014 9:55 pm 

    DC, you’re over-reacting. Anyway, I don’t come to this site to debate Arab culture and history with American-hating insulting firebrands such as yourself. I’m sorry that I hit such a sensitive nerve in you. But the fact remains, that the Middle East today is wracked by inter-tribal and religious conflict, and that makes getting oil out of the ME countries very difficult, expensive and dangerous. Blame it on America if you want — but what America and European nations found when they first went to the ME was a bunch of warring tribes, and nothing has changed since then. And… I’m a long way from being racist — just the opposite, in fact. Seriously, you’re over-reacting, but given that boiling hatred and anger inside you, its no surprise that you’re blowing up over this one. Take a pill. Relax.

  11. Harquebus on Tue, 28th Jan 2014 11:56 pm 

    Personally, I think that religion is a greater problem than tribalism in the ME. You can not debate those that have been brainwashed with religion.

  12. Keith_McClary on Wed, 29th Jan 2014 12:35 am 

    I think the imperialist powers preferred tribalism (eg., elevating selected tribes such as Sauds to royalty). They did not want any modern centralized states. Just going by what they have done, not what they say.

    Daniel Pipes is an ultra-rightist Jewish-supremacist Islamaphobe.

  13. meld on Wed, 29th Jan 2014 11:06 am 

    Religion is for the weak minded.
    spirituality is for the wise.

  14. simonr on Wed, 29th Jan 2014 12:07 pm 

    Wouldnt it be more useful to ask why there is tribal conflict in the first place.

    As for blaming religion, thats like blaming a bullet, not the guy that fired the gun.

    As for spirituality, seems a bit subjective to be honest.

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