Iraq Energy Outlook
World Energy Outlook Special Report Iraq Energy Outlook
World Energy Outlook Special Report
Iraq is already the world’s third-largest oil exporter. It has the resources and intention to increase its oil production vastly. Contracts are already in place. Will Iraq’s ambitions be realised? And what would the implications be for Iraq’s economy and for world oil markets? The obstacles are formidable: political, logistical, legal, regulatory, financial, lack of security and sufficient skilled labour. One example: in 2011, grid electricity could meet only 55% of demand. The International Energy Agency has studied these issues with the support and close co-operation of the government of Iraq and many other leading officials, commentators, industry representatives and international experts. This special report, in the World Energy Outlook series, presents the findings. The report: Examines the role of the energy sector in the Iraqi economy today and in the future. Assesses oil and gas revenues and investment needs. Provides a detailed analysis of oil, gas and electricity supply through to 2035, highlighting the challenges of infrastructure development and water availability. Spells out the associated opportunities and risks, both for world oil markets and for Iraq’s economy and energy sector.
For more information, and the free download of this report, please visit: www.worldenergyoutlook.org
WEO-2012 to be released 12 November 2012 Iraq Energy Outlook
World Energy Outlook Special Report 9 October 2012
001-02_pages de début_WeoIraq.indd 1 26/09/2012 12:17:34 INTERNATIONAL ENERGY AGENCY
The International Energy Agency (IEA), an autonomous agency, was established in November 1974. Its primary mandate was – and is – two-fold: to promote energy security amongst its member countries through collective response to physical disruptions in oil supply, and provide authoritative research and analysis on ways to ensure reliable, affordable and clean energy for its 28 member countries and beyond. The IEA carries out a comprehensive programme of energy co-operation among its member countries, each of which is obliged to hold oil stocks equivalent to 90 days of its net imports. The Agency’s aims include the following objectives: Secure member countries’ access to reliable and ample supplies of all forms of energy; in particular, through maintaining effective emergency response capabilities in case of oil supply disruptions. Promote sustainable energy policies that spur economic growth and environmental protection in a global context – particularly in terms of reducing greenhouse-gas emissions that contribute to climate change. Improve transparency of international markets through collection and analysis of energy data. Support global collaboration on energy technology to secure future energy supplies and mitigate their environmental impact, including through improved energy efficiency and development and deployment of low-carbon technologies. Find solutions to global energy challenges through engagement and dialogue with non-member countries, industry, international organisations and other stakeholders. IEA member countries: Australia Austria Belgium Canada Czech Republic Denmark Finland France Germany Greece Hungary Ireland Italy Japan Korea (Republic of) Luxembourg Netherlands New Zealand Norway Poland Portugal © OECD/IEA, 2012 Slovak Republic International Energy Agency Spain 9 rue de la Fédération Sweden 75739 Paris Cedex 15, France Switzerland www.iea.org Turkey United Kingdom Please note that this publication United States is subject to specific restrictions that limit its use and distribution. The European Commission The terms and conditions are available online at also participates in http://www.iea.org/termsandconditionsuseandcopyright/ the work of the IEA.
001-02_pages de début_WeoIraq.indd 2 26/09/2012 12:17:35 003-08 Acknowledgements_WeoIraq.indd 3 © OECD/IEA, 2012 Acknowledgements Mustafa Al-Maliky (seconded from Iraq’s SouthOilCompany), Ali this report were Sabah Al-Khshali (seconded from Iraq’s State Oil Marketing Organization), IEA. Theanalysis was co-ordinated by Tim Gould Energy Agency (IEA). Itwas Birol designedanddirected, Chief Economist by Fatih ofthe This report was prepared by the Directorate of Global Energy Economics at the International of Iraq’s petroleum industry, for hisexpert counsel. Tariq Shafiq, Managing Director of Petrolog and Associates and one of the founding fathers Karim, SeniorAdvisorto Iraq’s DeputyPrimeMinister for Energy. Sincere thanks alsoto Usama Dr did as Iraq, to visits team’s the and study this of completion the to assistance Ambassador Fareed Yasseen, Iraq’s Ambassador to France, and his staff provided unstinting Provincial the by and Council. Governorate, Basrah of Governor Deputy Al-Hassani, Ahmed by during their visit to Erbil. We greatly appreciated the welcome afforded the team in Basrah team IEA the to insights and support valuable provided Government, Regional Kurdistan in the Resources of Natural Minister Hawrami, Ashti H.E. Organization. Dr. Marketing Oil an invaluable interlocutor throughout, andto Falah Alamri, Director General oftheState Fayadh Hassan Neema, Director of the Technical Directorate at the Ministry of Oil, who was Special thanks are due to the leadership and staff of the Ministry assistance. of Oil and and, in particular, time their to for experts and officials senior Iraqi many to indebted are We speaker andchairofourhigh-level workshop inIstanbul. Prime Minister’s CommissioninIraq, Advisory provided indispensable inputaskeynote H.E. Iraq. in bodies government and ministries IEA and different the between relations working excellent facilitating in instrumental was which for Energy, for his strong support from the inception of this study through to its conclusion, We are particularly grateful to H.E. Dr. Hussain Al-Shahristani, Iraq’s Deputy Prime Minister across many government Iraq. bodiesin from the federal received government of Iraq, has the regional and provincial governments it and officials co-operation close the without possible been have not would work This Anne Mayne for graphics. producing the report, to Debra Justus for proofreading the text, and to Bertrand Sadin and IEA. Thanks also go to the Agency’s Communication and Information Office for their help in The report benefited from valuable comments and feedback from other experts within the Robert Priddlecarried editorial responsibility. essential support. Yanagisawa Wood. andAkira Peter Frank, Christian Besson, Christian Timur Gül, Timur Jung WooJung Lee, lsado Blasi, Alessandro PawełOlejarnik, adln Sanocka provided Mooney andMagdalena Sandra ar Cozzi, Laura and Dan Dorner. Principalcontributors to Timur TopalgoekceliTimur , ayd Elis, Dafydd Thamir Acknowledgements ael Festa, Capella Al-Saffar, Ghadhban, Chair of the of Chair Ghadhban, David Wilkinson, David Marco Baroni, Matthew 26/09/2012 12:17:51 3 © OECD/IEA, 2012 or reviewed early drafts of this report. Their comments and suggestions were of great great of were suggestions and comments include: They value. Their report. this of drafts early reviewed or work analytical underlying the on commented input, provided experts international Many workshop The Iraq. at found be may details for More analysis. this Secretary-General for data and feedback UN insights, valuable contributed have the participants of Representative Special Kobler, H.E. including figures international as well as representatives, industry and experts officials, Iraqi senior included Participants 6). page photo, (see study this to input essential gather to Istanbul in 2012 May 4 on held was IEA the by organised workshop high-level A co-operation. helpful and constructive their for Company & Commonwealth and Booz to and Brinckerhoff to Foreign Parsons gratitude our express also We Kingdom. the United Office, and Turkey Resources, Natural and Energy the of by provided Ministry support substantial the without realised been have not could study The 4 Sami Kamel Sami Jiyad Mousa Ahmed Jesse Jan-Hein Hybaskova Jana Husari Ruba Howard Michael Hawramany Hamah-Ameen Guelff Christopher Franceschini Gabriele Ensign David Elkind Jonathan Depledge Tim Cekuta Robert Carey Kevin Bridge Nicholas Aytekin Sadık Sefa Allibi Jabbar Al-Emir Abdulilah Al-Bayati Natik Alamri Falah Abdul-Hussain A. Majeed www.worldenergyoutlook.org/iraq General Electric General consultant Independent Institute Clingendael Iraq to Delegation Union European Ambassador, consultant Independent Government Regional Kurdistan Resources, Natural of Ministry Government Regional Kurdistan Electricity, of Ministry Kingdom United Office, Commonwealth and Foreign Eni States United State, of Department States Energy,United of Department BP States United State, of Department Bank World OECD the to Ambassador British Turkey Resources, Natural and Energy of Ministry consultant Independent Iraq Office, Minister’s Prime Deputy Iraq Commission, Advisory Minister’s Prime Iraq Organization, Marketing Oil State Brinckerhoff Parsons World Energy Outlook | . Special Report
Martin Martin 003-08 Acknowledgements_WeoIraq.indd 5 © OECD/IEA, 2012 Acknowledgements policies ofindividualIEA membercountries. or views the reflect necessarily not do expressed views Agency. The Energy International the of Director Executive the of authority the under produced been has publication This responsibility oftheIEA. any opinionsorjudgements contained inthisstudy. for Allerrors andomissionsare solelytheresponsible not are study this to contributed that organisations and individuals The Xiaojie Xu Clingendael Institute, The Netherlands Faisal Wadi Frank Verrastro Coby van derLinde Uqaili Thamir Jim Turner James Turner Wim Thomas Tessa Terpstra Simon Stolp King’s College London George Sarraf Piet Ruijtenberg Bill Ramsay Friedbert Pflüger Andrew Pearce Shohei Nishimura Hans Nijkamp Fayadh HassanNeema Omar Moussa Independent consultant Asri Mousa Ed Morse Salah Mohammed Hamish McNinch Takahiro Mazaki Claude Mandil Jeff Larkin Ken Koyama Raëd Kombargi Kenji Kobayashi Ali H.Khudhier Chinese Academy ofSocial Sciences South OilCompany Center for Strategic andInternational Studies Independent consultant Department ofState, United States Kingdom Department ofEnergy andClimate Change, United Shell Ministry ofForeign Affairs, The Netherlands World Bank Booz &Company ParPetro Consulting Former IEA Deputy Executive Director Parsons Brinckerhoff Japan Oil, GasandMetals National Corporation Shell Ministry ofOil, Iraq Schlumberger Independent consultant Citigroup Rumaila Operating Organization Mitsubishi Corporation Former IEA Executive Director Parsons Brinckerhoff Institute ofEnergy Economics, Japan Booz &Company Japan Automobile Importers Association South GasCompany 27/09/2012 14:14:54 5 1 3 2 © OECD/IEA, 2012 6 World Energy Outlook | Special Report
Participants of the Iraq Energy Outlook workshop organised by the IEA in Istanbul, Turkey on 4 May 2012. 003-08 Acknowledgements_WeoIraq.indd 7 © OECD/IEA, 2012 Acknowledgements Telephone: France 75739 Paris Cedex 15 9, rue delaFédération International Energy Agency Director, Directorate ofGlobalEnergy Economics Chief Economist Dr. Fatih Birol Comments andquestions are welcome andshouldbeaddressed to: w www.worldenergyoutlook.org. More information abouttheWorld Energy isavailable Outlook at Email:
(33-1) 40576670 [email protected]
27/09/2012 14:15:13 7 1 3 2 003-08 Acknowledgements_WeoIraq.indd 8 © OECD/IEA, 2012 26/09/2012 12:17:51 009-10 Table of Contents_WeoIraq.indd 9 © OECD/IEA, 2012 Table ofContents 3 2 1 Introduction Executive Summary Acknowledgements Projecting futuredevelopments The contextforIraq’s energy development Natural gas Oil andgasinvestment Iraq oilandgasresourcessupplypotential Iraq’s energy sector Iraq today:energyandtheeconomy Outlook forthe power sectorinthe Central Scenario Overview ofenergydemand trends Iraq: fuellingfuturereconstructionandgrowth Oil Environment andwater Security Legal andinstitutionalframework The economy Overview ofenergy demand Measuring the value ofchangesinthe power sector Investment inthe powersector Transmission anddistribution Water requirements Overview ofenergy supply Electricity generation Production Reserves andresources Crude oilconversion andbringing oiltomarket Production Electricity demand Reserves andresources
Table ofContents 26/09/2012 13:43:41 50 43 42 41 35 33 33 27 20 94 93 92 86 66 63 75 18 84 70 69 69 55 50 84 80 15 11 49 17 79 3 9 009-10 Table of Contents_WeoIraq.indd 10 © OECD/IEA, 2012 Annex A. 10 Annex B. Annexes 4
Outlook forend-usesectors References Units andconversionfactors Energy inIraq’s economicandsocialdevelopment Implications ofIraq’senergydevelopment Iraq’s impactoninternational gasmarkets Iraq’s impactoninternational oilmarkets Environment Delayed Case High Case The Central Scenario Iraq’s oilmarket impactinthe HighandDelayed Cases The Central Scenario Economic development intheHighandDelayed Cases Buildings andothersectors Industry Transport Water use Energy-related emissions
World EnergyOutlook |SpecialReport
101 108 122 108 115 119 116 114 100 104 103 102 101 129 131 129 107 26/09/2012 13:43:41 98 96 96 011-14 Executive Summary_WeoIraq.indd 11 © OECD/IEA, 2012 Executive Summary already in2020,are even more demanding. 9.2 of production oil anticipates which Case, High our in requirementsinvestment output and in the expansion over-relianceof risk the diminish route.sea-borne southern the infrastructureon The and to accommodate needed be will capacity transportation and storage oil Sufficient resources. freshwater scarce on stress potential reduce to and production oil support to essential be will fields southern Iraq’s to Gulf the from inland 8 to up bring project to challenging investment a Early in time. right the at ordinated progress all along the energy supply chain. Adequate rigs will need to be available required productionthe prospects. will Achieving and oil require levelexport of rapid, co- $200 averageof annual an Iraq stands to gain almost $5 actively explored hydrocarbon regions inthe world. Government, though contested by the federal authorities, have made this one of the most Regional Kurdistan the by awarded contracts where Iraq, of north the from also growth substantialfor possibility the up open would sectorhydrocarbon the of governance over of concentration A Basrah. south resolution differencesaround super-giant the of in fields 8.3 reaches and 6.1 to doubles than more production oil Iraq’s Scenario, Central our In outputloweroil thanthat implied by current contracts. trajectories for possible movement towards anticipates report this and industry oil global in excess of 9 output Reaching base. resource human its developing and stability political consolidating in success Iraq’s and conditions market international wealth, hydrocarbon its from value long-term derive to plans Iraq how on clarity removed, are investment to impediments which at speed the by determined be will practice in out works this How decade. current today’s 3 than higher times five almost level a to capacity, production oil in increase extraordinary an imply companies international with place in already its Contracts of hydrocarbon resources size orby thecosts ofproducing them. the by limited be not need output gas and oil its expand to ambition Iraq’s study of theopportunitiesandrisks facing Iraq’s energy sector. the in report, special landmark Thiswaters. troubled for course on markets energy global put Iraq’sand recovery will hinder Failure development. and economic social Iraq’s fuel can revenues resulting the of management effective and Iraq’spotential hydrocarbondeveloping in instability.Success oil and natural gas production as it recovers from three decades punctuated by conflict and the world’s third-largest oilexporter andhasthe resources andplansto increase rapidly its markets. energy global of security and stability the to contribution major Iraq’s energy sector holdsthekey to thecountry’s future prosperity andcan make a mb/d by 2020 would equal the highest sustained growth in the history of the The largest increase in production comes from the from comes production in increase largest The 2035. in mb/d billion and an opportunity to transform the country’s futurecountry’s transformthe to opportunity an and billion trillion in revenues from oil export over the period to 2035, series, provides a comprehensive a provides series, World Energy Outlook million barrels per day (mb/d), over the over (mb/d), day per barrels million Executive Summary mb/d by 2020 by mb/d mb/d of waterof mb/d Iraq isalready mb/d 26/09/2012 11:48:06 11 © OECD/IEA, 2012 which is –flaredwhich currently willbe a vital will step.notgas,But alone, beassociated sufficient mix. of energy oil in the domestic gas Natural can play role a in the Iraq’smore dominance much important reducing future, markets. global to confidence new bring would capacity the term, longer the in when, of spare reserve to have aim its met, a been hold needs reasonable most pressing but country’s priority Iraqi early an be cannot capacity production spare creating Deliberately Russia. exporter, oil overtaking global second-largest the is Iraq 2030s the by and China, mainly markets, Asian fast-growing to keya supplier becomes Iraq output. global in growth anticipated the of 45% around for accounts Iraq decade, current growth. to makes supply 2035 to Iraq period by global far contributor the largest greatly strengthened institutions and rapid development of the human capacity to create create to capacity human the of development rapid and institutions strengthened greatly require will diversification economic and Iraq reconstruction that much-needed Stimulating path follows. strategic the on depends activity economic diverse more translated and are greater into receipts oil which at speed the But industry. for and fleet vehicle growing an rapidly the to for fuel of and lead appliances incomes household for Rising electricity of today. consumption in Brazil increase of that with comparable capita per GDP its and higher, times four demand energy today, its than terms) real (in larger times five is 2035 in young and growing for population. demand rising create and for Iraq’s growth opportunities doguarantee not inthemselves, gas and oil but activities, energy; economic strong imply oil from revenues High to projected is energy of Iraq’s potential. below remain sources renewable of deployment hydropower, of exception 1 than more be would demand oil domestic $520 and revenues around forego gas-fired would efficient Iraq on transition, this reliance more without to generation: mix power oil-fired predominantly a from away 70 around the install to Over needs Iraq 2035, 2015. to period around demand peak estimated with up catch will generation electricity grid-based time, on delivered is capacity new planned if projections, meet our In to fully. demand capacity generation power net more 70% needs Iraq that estimate We country. the of parts many in basis daily a Iraq’son experienced being to still are cuts power critical prolonged but is electricity for demand development. rising national with pace keeping and up Catching Asia. to – gas natural to liquefied via – and countries, markets European neighbouring to supply gas cost-competitive very a provide potentially can Iraq as further, exports expand to there are opportunities market and resources The 2035. 20 approach and 2020 around start exports gas Scenario, Central the In resources. gas non-associated its develop to incentives creating on depend export for surplus a have to opportunity its and balance Iraq’s gas generation. power for fuel main the becomes gas 70 exceeds which demand, projected Iraq’s cover to 5 than ofmore Scenario Central inthe in Iraq’s production oil increase The 12 Power stations in Iraq produce more electricity than ever before ever than electricity more produce Iraq in stations Power In the Central Iraq’sScenario, gross productdomestic(GDP) Gathering and processing Iraq’s gas – and processing of associated much Gathering
gigawa World Energy Outlook |
billio tts of generation capacity and move and capacity generation of tts n cubic metres (bcm) in 2035 as as 2035 in (bcm) metres cubic n
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011-14 Executive Summary_WeoIraq.indd 13 © OECD/IEA, 2012 Executive Summary the of reach the people ofIraq.within prize a is this but task, easy an be not will powerhouse energy prosperousand economy. countryeconomyintothe globalan turning a such and Building a modern of foundations the build to revenue Iraq for of needs the Iraq’s and production base. resource its of richness the and potential its match that responsibilities and role global takenewrevitaliseeconomytoand a resources Energyits means on provide a Iraq with Scenario. $140 almost reach marketstighten, characterised probability, all and,in higher by more volatile prices.These slower progress in moving makesto cheaper sectorand more efficientpower electricity supply.the Internationaland oil develop to fail sectors services and industrial other lower, $3 nearly of 4 from the levels seen in 2011, resultingslowly inonly aincreases muchinvestment energy lower Case, trajectoryDelayed our forIn oil markets. production oil international (reaching $3 cost could Delay if fluctuations inprices andoil revenue feedthrough into irregular capital spending. efforts to the government’s modernise and if reform Iraq’s legal framework and institutions are delayed atrisk or frustrated, or be could increase anticipated The 2011. in sector $9 estimated the from up step significant a average, on The exports. gas and oil from annual investment revenueneed is highest in the current decade, at projectedmore than $25 the of 10% over just to equivalent Iraq will need cumulative energy investment of over $530 sectors oftheeconomy. and spending and to set the course necessary to encourage growth of the emerging non-oil revenues of management transparent and efficient ensure to policies, sound pursue and mb/d in 2020 and 5.3 and 2020 in mb/d There is a strong alignment between the needs of the global market for growth in growth for market global the of needs the between alignment strong a is There trillion compared with the Central Scenario, as export revenues are sharply are revenues export as Scenario, Central the with compared trillion per barrel in 2035 in real terms, nearly $15 nearly terms, real in 2035 in barrel per trillion in lost national wealth for Iraq and bring difficult times to times difficult bring and Iraq for wealth national lost in trillion mb/d in 2035). The cumulative impact on Iraq’s on loss impact cumulative a Theeconomy is 2035). in mb/d billion invested in Iraq’s energyIraq’s in invested billion billion in the Central Scenario, higher than in the Central the in than higher billion per year 26/09/2012 11:48:06 13 1 3 2 4 5 6 011-14 Executive Summary_WeoIraq.indd 14 © OECD/IEA, 2012 26/09/2012 11:48:06 015-16 Introduction_WeoIraq.indd 15 © OECD/IEA, 2012 Introduction importance ofthese exports oninternational markets. energy supplier, itexamines thescope for export ofIraq’s oilandgas andthe impactand major a as Iraq’spotential of assessment earlier the on Building revenues. export oil for potential large the by presented risks and opportunities the and development, economic broadercontextIraq’sthe of in energy of roleand the social atpreviouslookschapters. It Chapter energy development onthe environment. Iraq’s of impact the and transport, and industry buildings, sectors, end-use different the for outlook the consumption, electricity and fuel pricing,energy fossil to subsidies on of cost the quantifies policies It examines system. power future efficient an to contribute businesses, andthefuelpolicychoices,greater including use ofnatural gas, that can the challenges ofrestoring anadequate supplyofelectricityto Iraq’s householdsand sector, power the for prospects the particular in examines It 2035. to demand energy for Chapter delay inmobilisingthisinvestment. a to contribute could that factors institutional the assessing and gas, and oil in required investment the quantifying by ends chapter The pressure. reservoir maintain to supply forrigs, infrastructurenew for transportation, needrefining the and and export, for water oil andgas drilling and for wells new forrequirement the of terms in field, analysed are outlooks The major output. and basin by geological down broken projections, detailed Iraq’s resources, the factors that will affect the way that these are developed and provides Chapter that issues the remain to be resolved inorder to and supportfuture growth inproduction. fields, gas and oil key country’s the of some develop to contracted been have companies international that way the sector, the for framework institutional and legal repair.the stateatof lookspoor It a in or damaged infrastructureenergyeither facing Iraq’s multiple challenges energy sector as the the country recovers from decades of Ithighlights conflict that left much of the consumption. existing and production energy country’s the on data available best the by supported economy, national the in plays it Chapter and theway inwhichIraq’s energy can affect oiland global gas markets. to thecountry’s much-needed socialandeconomic development over thecoming decades This report examines the energy outlookfor Iraq, the way inwhichenergy can contribute 3 moves on to analyse Iraq’s domestic energy prospects and sets out our projections 2 assesses the prospects for growth in Iraq’s oil and gas production. It discusses It production. gas and Iraq’soil in growth for prospects the assesses 2 1 sets thescenewithananalysis ofIraq’s energy sector today andthe role that 4 sets out the national and global implications of the trends identified inthe trends identified the of implications global and national the out sets 4 Introduction 26/09/2012 12:18:16 15 015-16 Introduction_WeoIraq.indd 16 © OECD/IEA, 2012 26/09/2012 12:18:16 017-48 Chapter 1_WeoIraq.indd 17 © OECD/IEA, 2012 Chapter 1 | • • • • • • economic development. and social its fuel can resources These discoveries. further for potential vast as well and suppliesoffuel,isrecognised asanimmediate priority. capacity generation sufficient with system, electricity modern a Building widespread. demand; power cuts are a daily occurrence and the use of back-up diesel generators is stations produce morePower electricity supply. than everelectricity before,reliable butof supply islack still insufficientthe is to meet development Iraq’s to obstacle key A of projections conservative future oilproduction implyprofound effects onthe EvenIraqi economy. Asia. to going exports of share increasing an with productionoil nowthird-largest is above the is it and mb/d 3 oil exporter the in world, production and exports are increased and how effectively revenues are quickly managed. how Iraq’s sector: oil the on degree significant a to depends Iraq’srehabilitation of accounting exports oil with economy, for Iraq’s of cornerstone the already is Energy 13 the fifth- and the reserves oil have proven to largest estimated is It sector. energy its on depend will prosperity Iraq’s regional and globalenergy system.of the a powerhouse to becoming a path on it putting potentially generally,more economy its for and Iraq’s sector for energy outlook future the difference to huge a and a broader political consensus on the direction of future policy. sectors, Success will make financial and private by the participation support to conditions enhanced of better co-ordination framework,regulatory and legal unambiguous strengthenedand a capacity, making, decision human progress and across institutions improved substantial front: will require wide a objectives policy energy Iraq’s Meeting and export infrastructure, whileimproving, continues to beaserious constraint. However,70%. Iraq’s state of the patchy still transport, and energy storageprogressis exports have both increased by more and than production 40% and oil grid-based years, electricity five supply around last the In companies. energy international of number increasing an sector,by energy supported its for plans investment ambitious has Iraq and make itavailable for productive uses. gasproduction Iraq in flaredwas the as 2011, in facilities in place not towere it gather of 60% almost generation, electricity in particularly fuels, liquid of insteadgas natural using of advantages economic significant the Despite East. Middle the of rest the in Oil makes up more than 80% of Iraq’s primary energy mix, compared with less than 50% 95% of government revenues and equal to over 70% of GDP in 2011. The pace The 2011. in GDP of 70% over to equal and revenues government of 95% Iraq today:energy andtheeconomy Iraq today:energyandtheeconomy Highlights th -largest proven gas reserves in the world, as world, the in reserves gas proven -largest Old country,newstart? Chapter 1 26/09/2012 10:07:47 17 017-48 Chapter 1_WeoIraq.indd 18 © OECD/IEA, 2012
Figure Iraq’s reconstruction andits social andeconomic development. scope for further discoveries); the development of these resources can and should underpin 18 Turkey on 4 1. This analysis benefited from a high-level workshop held by the International Energy Agency (IEA) in Istanbul, 13 the and world the in reserves oil proven East Middle the in lowest the of one as indicator this leaving 2011, and 1980 between terms product domestic gross capita per Iraq’s as sharply, fallen have standards Living toll. severe a taken have instability internal and to 1980 it as future its to key recovers the from three and decades punctuated economy by Iraq’sconflict (Figure of cornerstone the is sector energy The Iraq’s energy sector
(Figure
1988 and with US-led coalition forces in 1991 and 2003), international sanctions international 2003), and 1991 in forces coalition US-led with and 1988 1.1 May 2012.
1.2). Yet Iraq is also a country of immense potential. It has the fifth-largest the has It potential. immense of country a also is Iraq Yet 1.2). ⊳
Iraq hydrocarbonresourcesandinfrastructure 1
(GDP) declined by more than one-fifth in real one-fifth than more by declined (GDP) th -largest proven gas reserves (and significant (and reserves gas proven -largest World EnergyOutlook |SpecialReport
1.1). Three wars (with Iran from 26/09/2012 10:07:48
017-48 Chapter 1_WeoIraq.indd 19 © OECD/IEA, 2012
Chapter 1 | promise andchallenge. the is Iraq of people the for prosperity into receipts oil in growth Translating economy. diversifiedmore a create to wealth oil its use to is Iraq for challenge central a term, long Iraq is still struggling to provide basic services, such as electricity and clean water. Over the as reconstruction, of imperatives the meet to essential are revenues export growing and East Middle the in countries resource-rich other of standards the income and was equivalent to more than 70% of Iraq’s GDP. These figures are high even by government of 95% around for accounted revenue oil 2011, In wealth. national of share constitutes the core of its economy, as revenue from exports accounts for an overwhelming Iraq’sa conservative estimated years,coming production basis, the when even over on oil consolidate political stability andsecurity. reform and the legal framework for the hydrocarbons sector, enhance human capacity and toneed overcome challengessetof relatinga investmentto infrastructure, in institutional will years. coming Iraq the in production oil in increase foundationrapid a the providefor fields major country’s the develop to companies international with concluded contracts which around 2.4 are revenues the resulting how managed and and spent. By mid-2012, oil output was above 3 increased are export and production quickly how sector: oil the on heavily very depends decades coming the in revivalIraq’s of pace The Sources: International Monetary Fund(IMF)databases; IEA analysis. Note: GDPismeasured at market exchange rates (MER)inyear-2011 dollars. Figure Dollars per capita ($2011, MER) 10 00 20 00 30 00 40 00 50 00 60 00 70 00 0 0 0 0 0 0 0 0 1.2 Iraq today:energy andtheeconomy ⊳ UAE
GDP percapitaforselectedcountries,2011 mb/d was exported. Iraq’s improving stability, its huge resource base and uatSaudi Kuwait Arabi a Turkey
Lebano nI million barrels per day (mb/d), of ranJ
(Figure ordanI
1.3). Sustained 1.3). raq 26/09/2012 10:07:48 19
2 1 3 017-48 Chapter 1_WeoIraq.indd 20 © OECD/IEA, 2012 270 around currently is and times recent in back fallen has output its although Iraq, of north Qurna field, with 1.3 Rumaila the southern of pre-eminence Ceyhan. continued the of highlights port picture Mediterranean This Turkish the to pipeline northern the via exported was share smaller a but south, the in systems mooring and terminals offshore tankerthrough 2.4 over and 70 around refineries, domestic todelivered 3 of average an at production daily shows 2012 June of month the for supply Iraq’soil of snapshot A cumulative oilproduction. 28 around produced have fields two Together,these 1950s. the in operation began which south, the in field Rumaila the and 1920s, the since super-giantfields (Box represented this in 20 2. Super-giant fields are defined as those with ultimately recoverable resources greater than 5 of influence malign the confirms inevery declines 1980 by steep decade followed since been have peaks supply as production oil conflicts, multiple Iraq’s of trajectory The Crude oil ofenergy supply Overview Sources: IMF, UNPD, World Bankandnational government databases; IEA analysis. Note: GDPismeasured at market exchange rates (MER)inyear-2011 dollars. Figure
$115 billio Populaon 1979, an average of 3.5 31 million mb/d of oil production, as well as the significant contributions from the nearby nearby West the from contributions significant the as well as production, oil of mb/d kb/d. GDP 72% Iraq (Phase I) and Zubair fields. Kirkuk makes a notable contribution to production in the
(Figure
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1.1). Iraq’s historical production record is dominated by just two by just dominated is record production historical Iraq’s 1.1). n
mb/d, and remains well below the 5.3% of global oil output that $482 billion Populao 75
GD 24% Iran (Figure millio P n n
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thousand barrels per day (kb/d) were (kb/d) day per barrels thousand
billion barrels of oil, 80% of Iraq’s of 80% oil, of barrels billion Saudi Arabia $578 billion Populao 28 millio GD 52% P n n
billion barrels. revenue Hydrocarbon GD P
26/09/2012 10:07:48
017-48 Chapter 1_WeoIraq.indd 21 © OECD/IEA, 2012 Chapter 1 | Box * Basedonfirst five months. Figure
in international expertise. bring to willingness a and technologies new availabilityof the on based plans, earlier of 6 to capacityraise to plan subsequent war.Iran-IraqA the of because realised, never was goal this But of5.5 capacity production creating of strategic time the that towards at formulated production goal oil bringing 1970s, the in success some had Iraq 8 to 2 only reached had Iraq But Iraq’s oil output mid-1960s, the In 1960s. late the in started Iraqthat boom region’soil the that on out missed was result net the and slow was process the But contractors. as assisting eventually companies foreign with output, oil country’s the expand and operate to Company Oil National Iraq the of creation the Following 1970s. the into well lasted which one, prolonged a but the process of establishing greater national control over Iraq’s resource wealth was the almost entire covering country. The position of IPC went into production decline after the Iraqi revolution of1958, oil to rights concessionary held which companies, international of exclusively up made (IPC), Company Petroleum Iraq the of choices by its resources. In the early years, Iraq’s oil output was determined by the investment Iraq’s oil production and exports have consistently lagged behind the potential implied mb/d 4 0 1 2 3 90 9019 2000 1990 1980 1970 the 1991 Gulf war. National ambitions now extend beyond the levels foreseen in foreseen levels the beyond extend now ambitions war.National Gulf 1991 the 1.1 mb/d. 1.4 ⊳ Iran-Iraq war Iraq today:energy andtheeconomy ⊳ Breaking throughthehistoricalceilingonIraq’soilsupply
Iraq oilproduction
(1.3 mb/d by the mid-1990s was, again, not realised, this time because time this realised, not again,was, mid-1990s the by mb/d mb/d) did not diverge widely from that of Saudi Arabia (2.2 (INOC) in 1964, Iraq started to develop the national expertise national the develop to started Iraq 1964, in (INOC) First Gulfwar
mb/d in 1973, by which time Saudi production was close was production Saudi time which by 1973, in mb/d Second Gulfwar 2012 0% 2% 4% 6% * 8%
bd y 1983. by mb/d (1990-2003) sancons Internaonal (right axis) Share ofworld Iraq producon (1996-2003) programme UN Oil-for-Food
mb/d).
26/09/2012 10:07:49 21
2 1 3 017-48 Chapter 1_WeoIraq.indd 22 © OECD/IEA, 2012 22 Figure 1.5 Iraq average daily oil production and transportation, June 2012
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World EnergyOutlook |SpecialReport =XEDLU +)2 +)2 3RZHUJHQHUDWLRQ :HVW4XUQD *XOIYLD$%27
5XPDLOD *XOIYLDVLQJOH 6RXWKHUQ 2QVKRUH SRLQWPRRULQJ SURGXFWLRQ VWRUDJH 2WKHU 6RXWKHUQ *XOIYLD.$$27 )LHOGV Notes: Numbers shown on diagram are in kb/d. Changes in storage levels account for flow imbalances. Northern, central and southern production refers to regions in Iraq as shown on the map in Figure 2.1. NGL production is included. ABOT = Al-Basrah Oil Terminal; HFO = heavy fuel oil; KAAOT = Khor al-Amaya Oil Terminal.
26/09/2012 10:07:49 Sources: Based on direct communication with Iraq’s Ministry of Oil and company reports; IEA analysis. 017-48 Chapter 1_WeoIraq.indd 23 © OECD/IEA, 2012 demand. gasoline anddieseleliminated itssurplusofheavy fueloil. of shortfall the have avoided could Iraq States, United the average in refinery an of those tosimilar productyields With price. and quality its lowering oil, exportedcrude streamof export Iraq 2011, In possibilities. an blended average heavy of kb/d 150 into of oil fuel the Chapter 1 | 4. Preliminary data for the first half of 2012 show a sizeable increase in diesel imports compared with 2011. of underlying issues are yet to be resolved (see later section on legal and institutional framework). April in region this from markets international to exports halted that authorities federal the with dispute a to due Figure in shown as area, KRG the from output oil Actual 3. around8.5 import to has Iraq that means mix product This total. the of 15% than less accounting for Aroundproductsthe of 45% coming Iraqiof out refineries are heavy oil,with fuel gasoline its domestic refineries complex more of modern, by afforded possibilities the short of and well needs falls refineries Iraq’s by produced products oil of range The of under-investment. periodssector, Iraq’sof long of suffered infrastructure,like the much essential effects has plants, but these are unable to produce high-quality petroleum products. The downstream topping small of number large a by supplemented are These total. the of 70% around for operational, with the country’s three largest refineries at Baiji, Doura and Basrah accounting 960 around at stands the 630 domesticto 670 supply of refineries around Oil Oil products substantial commercial production. which are production-sharing contracts, covering areas in which there has hitherto been50 no around concluded has Iraq of north Regional the Kurdistan in (KRG) the Government addition, In decade. the of end the before alone projects these productive capacity in the coming years, with potential output of more than 12 Iraq’s in growth dramatic be would result the commitments, production plateau oil their on deliver contracts these of all If Kirkuk). not (but Iraq in elsewhere projects gas and oil licensing national four since rounds of result a as reminder the bythe and 2008 in been awarded one have authorities, federal contracts ofthese Nineteen framework). institutional and by being operated legal are section, later the that (see contracts service technical under companies fields oil international from comes production oil Iraq’s of 70% than More some production capacity isalready inplace. by the federal authorities, but exploration activities are, in many cases, well underway and 2012. 2012. Export shipments restarted in early August 2012 and continue as of the time of writing, but a number kb/d average delivered in 2011. The current nameplate capacity of Iraq’s refineries 4 It also has a large surplus of heavy fuel oil for which it has no domestic use or use domestic no has it which for oil fuel heavy of surplus large a has also It million litresmillion dayper gasolineof 2.6 and Iraq today:energy andtheeconomy 2009. These contracts cover all the main southern fields as well as smaller as well as fields southern main the all cover contracts These 2009.
kb/d, but we estimate that only about 770 about only that estimate we but kb/d, 3 The legitimacy of these contracts has been contestedcontracts these been of has legitimacy The
kb/d in June 2012 was slightly higher thanhigher wasslightly 2012 June in kb/d
1.5, was significantly below production capacity production below significantly was 1.5,
million litresmillion dayper todiesel of meet
contracts, almost all of all almost contracts, kb/d of this capacity is capacity this of kb/d
(Figure
mb/d from
1.6). 26/09/2012 10:07:49 23 2 1 3 017-48 Chapter 1_WeoIraq.indd 24 © OECD/IEA, 2012 urgent priorities for theauthorities. the gas transmission network and bringing online new gas-fired power plants are therefore developing inplace, facilities processing and gathering gas Putting environmentaleffects. hugely wasteful given the continuing shortfall in electricity supply in Iraq and has damaging capacity, more than half of the gas produced was flared (rather than marketed and wheretotal production around 20 was marketed than (rather flared was produced estimates for our consistentwith estimate is monthly This productively). consumed gas the of half than more capacity, southern oilfields 24 5. Iraq has also joined the Global Gas Flaring Reduction Partnership, which supports efforts to reduce flaring. the levels reached in1979. often found to keep equipment running, but Iraq’s effective oil export capacity is still below Nations United the proper maintenance. Some spare parts and equipment were brought in under the terms of deterioratecondition international as sanctions interfered 1990s, substantially the in facilities,with their Processing saw sector. outright, destroyed energy not where pipelines, the and tanks in storage stations, progresspumping on constraint serious a been has improving, although infrastructure, export and storage Iraq’s transport, of condition The Transport, storage andexport infrastructure 2 nearly 2012, June In produced. volumes the with pace kept not has facilities these and of expansion maintenance and 1980s the in only facilities processing Iraqgas began large-scale flared: in was invest to gas this of the much followed Historically, has therefore output. oil and of gas profile rollercoaster byassociated dominated is production gas Iraq’s Natural gas Sources: Iraq Ministry ofOil;USEnergy Information Administration Figure
Yield 100% 20% 40% 60% 80% 0% 1.6 billion cubic metres cubic billion ⊳
States, 2011 Average (Figure
Oil-for-Food programme and inventive and improvised solutions were solutions improvised inventive and Oil-for-Foodand programme Iraq
1.7). However, we estimate that, due to the lack of gas processing refinery (bcm) of gas were produced, with around 55% coming from coming 55% around with produced, were gas of (bcm) 5 product
bcm, of which around12 which of bcm, slate United States World EnergyOutlook |SpecialReport in Iraq
(EIA); IEA analysis. compared
bcm was flared. Flaring iswasflared. Flaring bcm Heavy fueloil Gasoil/diesel Jet fuel/kerosene Gasoline LPG Other to the United
2011, 26/09/2012 10:07:49
017-48 Chapter 1_WeoIraq.indd 25 © OECD/IEA, 2012 Chapter 1 | Figure 1.7 Iraq monthly gas production and transportation, June 2012
⊳ Iraq today:energy andtheeconomy
Notes: Total production for the month of June 2012. All numbers shown on diagram are in million cubic metres (mcm) unless otherwise stated.
26/09/2012 10:07:50 Northern, central and southern production refers to regions in Iraq as shown on the map in Figure 2.1. 25 Sources: Based on direct communication with Iraq’s Ministry of Oil and company reports; IEA analysis. 2 1 3 017-48 Chapter 1_WeoIraq.indd 26 © OECD/IEA, 2012 the same periodto 26%and 26 (Figure2011 by 52% of exportsthese directedbeen has share to fast-growing markets,Asian increasing fromrising to 2008 in 32% An Russia). and Arabia Saudi (after world the in exporter oil largest of oil to global markets. Oil exports have rebounded in recent years, making Iraq the third- Despite the problems with infrastructure, Iraq has been an increasingly important supplier ran into political difficulties andhas been largely inoperative since system, built to the Mediterranean ports of Banias in Syria and Tripoli in Lebanon, likewise 850 carry to designed is Pipeline Strategic The Baghdad. near Doura, at refinery the to Company Oil South the pipeline currentlytotransportis only that forit used frommean oil principally domestic purposes, the of parts northwards, to Damage crude Baghdad. around southern refineries to pumping or Turkey via of export for or Gulf the via export for southwards crude Kirkuk pumping of option the Iraq give to intended was which link, reversible,domestic a Pipeline, Strategic the via Iraq northern and central to connected are fields southern The capacity of1.6 600 is Oil, of Ministry the to according route, this along capacity available maximum The operational. is pipelines twin the of one only but Terminal Oil Terminal Al-Basrah terminals, offshore existing the through went exports sea-borne Iraq’s of remainder The capacity. their of one-quarter 442 around not all of this can yet be utilised single-point due to bottlenecks elsewhere. For the called month of June facilities, loading crude mooring systems (SPMs), offshore brought nominal export capacity new up to nearly 3.4 of commissioning the when 2012, early in expanded was capacity export southern and underwayareSeveral projects storage capacity isessential for Iraq’s oiloutputgrowth. and transportation of expansion timely further but 2012; in far so observed curtailments improving, with is new storage this capacity being that built at the signs main export are depot at ThereFao constraints.and fewer infrastructure to response in regularly curtailed was fields oil southern at production 2011, In production. of shut-down a to directly lead any delays or weather-related interruptions to loading tankers at the offshore facilities can that it means as problem, a particular is Iraq of south the in storage sufficient of lack The Iraq’s invasion of Kuwait and later expropriated by Saudi after closed but 1990, in commissioned was Sea Red the Yanbuon of port Arabian Saudi to the Iraq southern from apipeline politics: regional and conflict to victim fallen largely 50 below were 2012 June in flows
(KAAOT). Iraq’s other main export route is the northern pipeline route to Ceyhan, kb/d of crude oil was exported by tanker via these new SPMs, using just overjust using SPMs, new these tankervia byexported was oil crude of kb/d mb/d. Actualflows averaged just over 300
1.8), while the shares going to North America and toEuropesharesAmericaand felltogoingNorththe while over1.8),
kb/d, but operating capacity is estimated to be much lower: actual lower: much be estimated to is capacity operating but kb/d,
22% respectively.
kb/d. Attempts to diversify oil export options have options export oil diversify to Attempts kb/d. World EnergyOutlook |SpecialReport
kb/d, much less than the nameplate the than less much kb/d,
Arabia. Another westward export
kb/d inJune 2012. AO) n Ko a-my Oil al-Amaya Khor and (ABOT)
1982.
mb/d. However,
2012, 26/09/2012 10:07:50 017-48 Chapter 1_WeoIraq.indd 27 © OECD/IEA, 2012 Chapter 1 | Note: Thepercentage figures are compound average annual growth rates. Figure dollars), nearly one-fifth higher than the Middle East average and twice the global average. each produce to 0.4 uses Iraq standards: global by high actually is consumption energy efficiency means national and that low productivity economy, of Iraq’s size the to relative However, and only a little more than one-third of the level in the rest of the Middle East equivalent (toe) per capita. The per capita figure is lower than the global average of 1.9 38 was whole a as country the for demand energy primary 2010, of As disrupted. frequently been has use energy of pattern the and East Middle the in elsewhere than strong less much been has growth of Energy consumption in Iraq has nearly quadrupled over the last three decades. But the rate ofenergy demand Overview Sources: Direct communication withIraq’s State OilMarketing Organization; IEAanalysis. * Basedonfirst five months. Figure
toe per capita 100% 20% 40% 60% 80% 0. 1. 1. 2. 2. 3. 3. 0% 0 5 0 5 0 5 0 5
1.9 1.8 90 90 00 2010 2000 1990 1980 4.2% 0820 21 012012 2011 2010 2009 2008 Iraq today:energy andtheeconomy ⊳ ⊳
$1 Primary energydemandpercapitainIraqandtheMiddle East Iraq crudeoilexportsbydestinationmarket 000 of national output (based on market year-2011exchange on in rates (based output national of 000 0.4% Ir a q
million tonnes of oil equivalent (Mtoe), or 1.3 tonnes of oil of tonnes 1.3 or (Mtoe), equivalent oil of tonnes million 0.5%
toe per capita 0. 1. 1. 2. 2. 3. 3. 5 0 5 0 5 0 5 0 9019 00 2010 2000 1990 1980 2.4% Rest oftheMiddleEast * 3.6% 3.5% North America Eur Asia
(Figure o p e
1.9). toe toe toe 26/09/2012 10:07:50 27
2 1 3 017-48 Chapter 1_WeoIraq.indd 28 © OECD/IEA, 2012
thirteen weeks ofoilexport revenue. international $20 markets, around availableon was prices the on Iraq’s based to subsidies consumption, oil of value the estimate that we but demand, appearshavedampen tothis helped and 2007 in productsubsidies reduceoil to price of gasoline being 28% of the price paid for imports and thethat domestic of diesel 11%. The governmentwith took steps in Iraq, subsidised are products Oil heating. winter gas petroleum liquid of largely consists buildings in use Oil units. diesel grid-connected large and generators crude oil and gasoil is also used), while substantial amounts of gasoil are used some to (although oil fuel fuel private heavy is stations power grid-connected main the in consumed oil the of Most 2003. since imported been have which of half than more vehicles,light-duty three estimated an has now country the years; recent in surged have road transport. Iraq has seen strong growth in demand for gasoline as car ownership levels by dominated is consumption, final total of 60% around for accounts which transport, in largest amount of oil is transport, followed by power generation and buildings.Energy use 28 2010 in Iraq for balance energy On the basis of the available data (which have limitations), we have constructed a domestic Iraq) had fallen below 50% (Figure energy use. By 2010, the share of oil in the Middle East’s primary energy demand (excluding industrial of a share greater taking as well as generation power for oil replacing often gas mix, energy the in gas of towardsgreaterconsumption been has East Middle the in trend general the time, Over fuels. fossil by dominated is consumption energy domestic Iraq’s and use, oil still accounts for around accounts for still oil use, and Figure largest facility at Mosul). bytoneedimposed the match irrigation flows and safety the in (as of concerns case Iraq’s 1.5 than 2.3 of capacity installed gross some electricity generated from hydropower plants in the north of Iraq. These plants have region,sharenon-fossilthe of Iraq’sin fuels therealthough energysmall,is is primary mix 100% 20% 40% 60% 80% 0% 1.10 GW, water low reservoirs in upstream, levels combination of constraintsa to due 9019 0021 9019 002010 2000 1990 1980 2010 2000 1990 1980 ⊳ Iraq Evolution oftheenergymixinIraqandMiddleEast (LPG), which is widely used as a fuel for cooking, and kerosene for kerosene and cooking, for fuel a as used widely is which (LPG),
gigawatts (GW), but operating capacity is estimated at less estimated is capacity operating but (GW), gigawatts (Figure
1.10). Although Iraq has plans to increase gas production 80% of primary energy demand. As elsewhere in the in elsewhere As demand. energy primary of 80%
1.11). This shows that the sector consuming the consuming sector the that shows This 1.11). Rest oftheMiddleEast World EnergyOutlook |SpecialReport
billion in 2011 – equivalent to aroundequivalentto – 2011 in billion
million passenger million Oi Gas Hydro Other renewables l 26/09/2012 10:07:50
017-48 Chapter 1_WeoIraq.indd 29 © OECD/IEA, 2012 Chapter 1 | Figure 1.11 Iraq domestic energy balance*, 2010 (Mtoe)
⊳ Iraq today:energy andtheeconomy
26/09/2012 10:07:50 * Oil exports, oil product exports/imports and electricity imports not shown. Gas flaring not shown. ** Includes losses and fuel consumed in oil and gas production, 29 generation lost or consumed in the process of electricity production, and transmission and distribution losses. 2 1 3 017-48 Chapter 1_WeoIraq.indd 30 © OECD/IEA, 2012 30 of power plants hasto bereduced at timesofpeak demand to reflect theiroutput atthis temperature. when the ambient temperature is typically around 45 days, summer hot on occurs demand peak Iraq, In conditions. normal under production their tocompared Notes: At high ambient temperatures, the maximum achievable output from thermal power plants declines Figure the power sector inIraq. for priority immediate the is fuel, of supplies adequate has it that ensuring capacity,and generation additional Building reliable. more becomes supply electricity the as occur to (Figure 70% around 15 was in 2011 was around 9 from being sufficient to meet demand. We estimate that the net capacity available at peak far still is it 2006), than higher 70% around was 2011 in production daily net (peak years recent in capacity electricity grid-based supply. in increase significant electricity a Despite One of the main obstacles to Iraq’s economic and social development is the lack of reliable Electricity but withlimited success sofar. investment to rehabilitateattract (and in manyto cases reopen) tried facilities and modernisehas equipment, government The all). at not (or capacity nominal their below well at operating are enterprises these of Many environment.market a in compete to equipped leather, furniture, products, dairy etc.), butwithoutdated technology that makes themill- steel, and iron (including fertiliser, industry chemicals, petrochemicals, cement, glass heavy and ceramics) to light from industry (textiles, sectors, of range a across assets owned state- of largely consists base Iraq’sindustrial 1990s. early the since levels these 3 around over just at Iraq in low very is use energy Industrial
GW 10 15 20 0 5 GW, resulting in a need for around 6 around for need GW, a in resulting 1.12 capacity Gros s ⊳ and availablepeakcapacity,2011 Iraq differencebetweengrossinstalledgenerationcapacity
1.12). This is before taking account of the increase in demand likely demand in increase the of account taking before is This 1.12).
GW while the estimated net capacity required to meet peak demand Own use at 45°C Losses Long-term outages outages
°C. Because of this, the theoretically available capacity GW more available capacity – an increase of increase an – capacityavailable more GW World EnergyOutlook |SpecialReport maintenance problems Fuel an
te n hs en tgat at stagnant been has and Mtoe d Availabl at peak 6 GW e Required at peak
26/09/2012 10:07:51
017-48 Chapter 1_WeoIraq.indd 31 © OECD/IEA, 2012 Chapter 1 | increasing in role useful electricity supplyfrom the thegridin KRG area inrecent years. a played having contracts (IPP) producer power independent with Iraq, within electricity grid providing to approaches policy different also are There development. their strategies distinct for with Iraq, of rest the and area KRG the for grids largely separate There operatingare good electricityconditions). under turbines gascycle combined- new for achievable 55% around with (compared 31% currently is particular in (Figure balance Iraq’s energy in item significant a represent losses conversion and standards international by low still is it but sector, the of efficiency overall the improve to helped have additions capacity Recent significantly. entire 1990s, during which time the state of(250 the existing generation2% stock alsomere deteriorated a 2000; since added been has 47% further a forelectricity. demandIraq’s of Justoverhalf existing growing generation nominal capacity pre-dates 1990; meet and with up catch to expansion, rapid as well as upgrading, and Existing generation, distribution and transmission infrastructure is in need of rehabilitation electricity supply(operating at capacity) anddemand. levels around 50% above the average demand level, increasing the gap between grid-based reach to expected be could demand electricity hourly summer,peak the country.During highest peak the occurring in the summer months as a with result of very high temperatures seasonal, in much of the is demand electricity that is Iraq for challenge additional An Iraq’s population. of 30% governorates,for accounting six in less or day per hours twelve Basrah. At the other end of the scale, electricity supply from all sources was reported to be governorates,averagesouthern than some innotablyhigher in also Reliability is demand. Government (KRG) area is increasingly reliable, although cut-offs (Figure still occur at times country of peak the across varying end- usersto electricity of availability average the generation, non-grid of use the with Even an expensive way being to provide as electricity, well diesel generators As also contribute grid. to local the air pollution. from than generation private from supplied morefor electricity times the fifteen to ten paying were 2009 customers residential same that the suggested electricity: survey grid than higher considerably is consumers to provide they private generators receive subsidised fuel from the government, the price of the electricity termsin flexibilityof providing and electricityaccess ruralto areas. However, even though supply electricity in Iraq’sshortfall reducing in role important an play currentlygenerators Private 2009a). approximately that estimated survey 2009 900 a alone, Baghdad central In grid. the from 3 for accounted generators shared in2011 that we estimate quantify, but to difficult is sources such from a providedgeneration The 2012). or (IKN, level neighbourhood generator at operating generatorshared household private a either generators, private with network public the To try and fill some of the electricity supply gap, around 90% of Iraqi households supplement megawatts (MW) of private generation was available for use (Parsons Brinckerhoff, (Parsons use for available was generation private of (MW) megawatts (from all sources) was limited in 2011 to around eleven to nineteen hours per day,per hours nineteen to eleven around to 2011 in limited was sources) all (from Iraq today:energy andtheeconomy
terawatt-hours (TWh), on top of the 37 the of top on terawatt-hours (TWh),
(helping to reduce the number of blackouts) and also to bring benefits bring to also and blackouts) of number the reduce to (helping
.3. lcrct spl i te udsa Regional Kurdistan the in supply Electricity 1.13).
1.11). The efficiency of gas-fired plants gas-fired of efficiency The 1.11). TWh of consumption that came that consumption of TWh
MW) was added during the during added was MW) 26/09/2012 10:07:51 31 2 1 3 017-48 Chapter 1_WeoIraq.indd 32 © OECD/IEA, 2012 households to the grid,hasbeenseverely degraded. in connections Cross-border IranTurkeywith and of efficiency. amountedwhich toimports,almostfor 6 allow electricity some levels modern attaining reliability, of and terms functioning in not of though terms in order working reasonable in lines transmission transmission system remains relatively robust, with the network of400 network the with robust, relatively remains system high-voltage the transmission of performance The maintenance. of lack a and sabotage subsequent 32 region East Middle the in highest the are Iraq in losses distribution and transmission Electricity Sources: IKN (2012);IEA analysis. Figure
2010. However, the distribution network, which is designed to connect 98% of Iraqi 98% to connect isdesigned which network, distribution the However, 2010.
(Figure 1.13
1.14), in large part because of damage sustained during the 1991 Gulf war,Gulf 1991 the during sustaineddamage of because part large in 1.14), ⊳ governorate, Iraq sourceandreliabilityofelectricitysupplyby 2011 World EnergyOutlook |SpecialReport
kilovolt
TWh (kV) 26/09/2012 10:07:51
017-48 Chapter 1_WeoIraq.indd 33 © OECD/IEA, 2012 Chapter 1 | swings sharp to subject are revenues export oil Monthly sector makes the economyoil highly dependent on its the prevailing conditionsof in the global oilsuccess market. the on development economic Iraq’s of dependence heavy The The economy The context for Iraq’s energy development higher thanfor theresidential sector. of $0.10 rate a flat is users industrial for tariff The level. tariff low the by without paying at all means that the effective rate of subsidy is even higher than is implied network connections. The high illegal proportion many of residential are consumers there who use and grid electricity – network distribution the enters that electricity the of third one- on around only is collected revenue tariff that estimated is it – weak relatively also available,is electricity exacerbating problems with system reliability. Payment is discipline grid-based when times at possible, as far so consumption, their concentrate to incentive generators,sharedprivatefromsourced and electricity comparedend-usershave with an $0.16 of 2010 in price electricity average OECD household the than lower times ten almost is price This band. price lowest 800 only consumption Iraq’s in residential sector (thelast 2010 in year which for we have data) was household per Average threshold. this above consumption for prices higher with month, sliding a starting $0.017 from on scale, charged is consumers household to grid the from provided Electricity low. so is service of quality the while prices raising of impossibility political the and patterns Prices for electricity from the grid are heavily subsidised in Iraq, reflectinghistorical pricing Sources: Arab UnionofElectricity (2010); IEA databasesandanalysis. Note: Thesplitbetween transmission anddistribution lossesisestimated forSaudi Arabia andthe UAE. Figure
10% 15% 20% 25% 30% 35% 0% 5%
1.14 Iraq kWh per year, so most households consume all or most of their electricity at theat electricity their of mostyear, or per all kWh consume households most so Iraq today:energy andtheeconomy ⊳ Yemen Electricity lossesbytypeinselectedcountries,2010 Kuwait
per kilowatt-hourper odnLebano Jordan per kWh. Since grid-based electricity is relatively cheap relatively is electricity grid-based Since kWh. per (kWh) for consumption up to 1 to up forconsumption (kWh) nU Arabia Saudi
AE
(Figure Qatar
.5; rc fls in falls price 1.15); per kWh, much kWh, per
000 Distribuo Transmission kWh per kWh 26/09/2012 10:07:51 n 33
2 1 3 017-48 Chapter 1_WeoIraq.indd 34 © OECD/IEA, 2012
34 Emirates seven times (Figure Arab United the and times three than more Kuwait coverage, the double to closer had year,same revenuesthe oil in than centralreserveswereless bank whereasSaudi Iraq’s data, 2011 on Based limited. relatively is this do to Iraq’sability but expenditures, can potentially andrevenues government between mismatches out smooth objectives) help to resources these use ofgovernment range a broader serve to used often funds, its This increases centralfornationalreserves, currency, prices. primarily a bank used backing sovereign or wealth market actual to the as (such reserves largefinancial Governmentswith closer prices. oil in decline a tovulnerability getting is and years recent in increased breakeven has fiscal government – its revenuesexpenditureplanned to price – oil match to order in requires Iraq that price oil the countries, exporting oil many in As Sources: Direct communication withIraq’s State OilMarketing Organization; IEAanalysis. Note: Iraq alsoreceives additional revenue from exporting asmallamount bytruck. Figure dependence ofIraq’s economy onitssea-borneexports inthesouth. risk. Figure this to mitigating is essential finances national of management sound the that means which policy, fiscal transmittedthrough economy typically non-oil the is to volatility revenue Oil expenditure. planned on quickly back cut to government federal the forcing sharply, revenue Iraq’s cut early-2009 and late-2008 balanced and growth Sustainable in 2012. the in economy 30% requiresto increasedmid-2000s diversificationthe in away15% fromaround GDP,from oil, of intoshare other a as increased has bill wageassociated the and 2003 since doubled than more workforcehas maintain sector to public The population. Iraq its relative to world the in sectors enable largestpublic the of that one revenues the via is market labour broader the on has oil that impact largest the on), so and companies jobs service many suppliers, are (via thereindirectly created Although employment. total of 2% than less for directly account While oil export revenues are equivalent to more than 70% of GDP, the oil and gas sectors Billion dollars (nominal) 0 1 2 3 4 5 6 7 8 07 08 0921 2011 2010 2009 2008 2007 1.15 ⊳ Iraq monthlyoilexportrevenuesbyroute
1.16). World EnergyOutlook |SpecialReport
.5 lo hw te high the shows also 1.15 2012
(south) Tanker (north) Pipeline
Arabia 26/09/2012 10:07:51
017-48 Chapter 1_WeoIraq.indd 35 © OECD/IEA, 2012 Figure Chapter 1 | federal andregional authorities. the between responsibility shares constitution the resources,water environment and the distribution, and production electricity of case the In interpretations. various and has been to subject and development, exploration over hydrocarbon jurisdiction of question achievesthe cover explicitly not However, does people. thatconstitution the the to benefit wayhighest the a in wealth gas and oil Iraq’s develop to policies strategic necessary the with and fields present fromextracted gas and oil of management the with tasked is and governorates”. The federal government, with the producing governorates and regions, regions the all in Iraq of people the all by “owned are resources gas and oil constitution, the boundariesto According region. federal a of status overall the accorded area KRG the the with governance, system of democratic within afederal operates establishes which constitution, sector 2005 the energy by established the for framework legal The Legal andinstitutional framework Sources: IMF, SWF Institute andDevelopment Fund for Iraq databases; IEA analysis. the lowest fiscal breakeven oilpriceofthe countries shown. broader range of government objectives). While Qatar has a relatively low number funds of years wealth cover, sovereign it of also has value estimated the national appropriate, where a and, backing currency) for primarily (used reserves bank central include estimates reserves Financial Notes: in theDoingBusiness countries 183 of out was ranked finance. Iraq 164 to access bureaucratic poor delays and obstacles, regulatory electricity), as (such services essential of provision unreliable the are high relative to those in many other countries, mainly as a result of security concerns, business doing of costs the activity: entrepreneurial on brake a today,puts stands it as Iraq, in environment However,business required.the are enterprises medium and small sector,privateparticularly the in growthfacilitate to Policies agriculture. as such sectors labour-intensiveof performance improved the as well as services, and sectors industrial
Billion dollars (2011) 1 00 20 40 60 80 0 0 0 0 0 0 1.16 Iraq today:energy andtheeconomy UAE ⊳ in selectedcountries,2011 Number Arabi Saudi 2012 a survey uatIa QatarI Iran Kuwait of years (World Bank, 2012). cover for oil revenues raq 0 2 4 6 8 10 from
Years financial
(often used to serve a serve to used (often Financial reserves revenue (rightaxis) reserves tooil Rao offinancial reserves
26/09/2012 10:07:52 35
2 1 3 017-48 Chapter 1_WeoIraq.indd 36 © OECD/IEA, 2012 Box the federal government contestedbybeen has legitimacy whose 2007), from legislation own its consistentwith followedKurdistanbythe Regional Government production-sharingon (based contracts development (based on technical service contracts) co-exists uneasily with the approach hydrocarbonfederalnew a momentpassing for thatthe system lawsmeans resource of fields and operating with a degree of financial and administrative autonomy. The delay in (INOC) as a state-owned company managing all of the state interests in current and new sector’s institutional structure, notably the (re-)creation of an Iraq National Oil Company the reformsto possible includes considerationalso under hydrocarbonlaws of package broader with intertwined become issues, notably the question of revenue has sharing between the centre and the regions. sector The hydrocarbons the in authority making 36 overcome the impasse in discussions over new federalto hydrocarbon trying laws. of intention the with Iraq in established was committee parliamentary special a 2012, August In 7. decades) are also still applicable. backdate which of (some constitution the predate that laws of range a legislation, new of absence the In 6. 2006. Variousdrafts newof federal hydrocarbons legislation have sincediscussion underbeen Council’s composition and competences. be entrusted to a Federal Oil and Gas Council, but no consensus has yet been reached on the risk andreward withoutaclear view ofthesize andqualityofpotential resources. between balance right the strike to difficult be can it as unknown), not (but common service technical contracts. favour Offering fixed often remuneration risk technicalservice geological contracts for low exploration of is less fields discovered with holders production (paymentkind). Resourceoil in or cash either formcostof recoverythe in and remuneration receive developers point which at market, to brought is resource the until investors) outside the by “carried” generally are investors (state investors outside the by borne is costs development and exploration of financing the contract, of types both In risks. market other and technical geological, as well as fluctuation, price oil of risk downside and benefit upside the both thereforesees holder contract production-sharing The produced. or foundoil/gas the of value the on based returns contracts production-sharing provide while considerably), remunerationvary can this of nature and timing the (although done work remuneration for as contractor the to the core, at their produced oil of barrel But, per fee a provide field. contracts service technical of that is difference size the and price oil the notably variables, key of Direct the gas. and impact the among and terms oil of variety the their by complicated are are them develop between comparisons to holders contracts resource major production-sharing by used and instruments contracts service Technical 1.2 6 Under these drafts, co-ordination between the federal level and the regions would ⊳
Technical servicecontractsandproduction-sharing
(Box 1.2). 7 The complex debate over control and decision- World EnergyOutlook |SpecialReport 26/09/2012 10:07:52 017-48 Chapter 1_WeoIraq.indd 37 © OECD/IEA, 2012 * Production figures are in kb/d for oil projects and bcm per year for gas projects. ** Themaximum projects. for gas year per bcm and oil projects remuneration for fee (Max. fee) is inUSdollars perbarrel ofoilequivalent. kb/d in are figures Production * Chapter 1 | Table production duringtheplateau production period is lower thanagreed. that event the in reduced be can fee remuneration the practice: in achieved be to likely the although to produce, agreed havethatamountscontracted been thosethan areconsideredhigher many tobe casesin has consortium the that amount plateau the production The is commitment expenditure). to cumulative income cumulative of ratio the of with the level falling as the overall contract,profitability each of the in fixed contract is increases equivalent) (measured oil in terms of barrel per dollars (in remuneration maximum projects (Ahdab, Four Phase Qurna possible. West Rumaila, as quickly as level this to reach operators incentivising fees, of payment the and costs of reimbursement the for trigger the provides it because maximumremunerationthe and barrel per (“max.fee initial production are the target (“initial target”in Table contracts service the technical of parameters Key consortia. these of each in stake, 25% a with present, is companies Iraq’soperating state-ownedof (Table company operating international an by led consortium a to each date, to government federal the by awarded been have contracts service technical Nineteen (2012) Four (2010) Three (2009) Two (2009) One 08AdbPetrochina Ahdab 2008 round Bid
1.1 lc 2Bashneft Block 12 lc 0Lukoil Block 10 lc uatEeg Oil-prone Kuwait Energy Block 9 lc aitnPtoemGas-prone Pakistan Petroleum Block 8 Siba Mansuriyah Akkas amhSonangol Najmah aryhSonangol Qairayah Badra hra Petronas Gharraf afy Petrochina Halfaya ano Shell Majnoon West Qurna isnGopCNOOC Missan Group Zubair etQra()ExxonMobil West Qurna(I) ual BP Rumaila licensing block Project or ⊳ Iraq today:energy andtheeconomy
exploration anddevelopment Contracts awardedbyfederalauthoritiesforhydrocarbon I)Lukoil (II) Kuwait Energy TPAO KOGAS GazpromNeft Eni Operator
I and Zubair) have already reached this initial threshold. The threshold. initial this reached already have Zubair) and I
1.1), the plateau production commitment (“plateau target”) Oil-prone Oil-prone ev i 20 Heavy oil ev i 30 Heavy oil Type a 0.26 Gas a 0.78 Gas a 1.03 Gas Oil Oil Oil Oil Oil Oil Oil Oil Oil Oil
fee”). initial targetThe important is Target Initial 1 1 7 21 175 120 0 225 201 6 417 268 7 1279 173 n/a n/a n/a n/a 15 35 03 3 1.40 535 34 70 79 5 2.30 450 91 97 519106.00 140 129 25 Production* 2012 June 2 ------1 1 - Plateau target 1 1 1 1 2 2 2 2 1 6.00 110 2 5.00 120 7 5.50 170 3 1.49 230 0 1.39 800 0 1.15 800 0 2.00 200 2 1.90 825 5 2.00 850 n/a n/a n/a n/a . 7.50 1.0 . 7.00 3.1 . 5.50 4.1
1.1). One 1.1). fee** Max. 5.00 5.99 6.24 5.38 26/09/2012 10:07:52 37
2 1 3 017-48 Chapter 1_WeoIraq.indd 38 © OECD/IEA, 2012 are generally assessed as generous, but not unprecedented. not but generous, as assessed generally are with no remuneration. The subsequent terms, after a commercial discovery has been made, costs all of burden the carry will contractholder the that and found be hydrocarbonswill commercial no that possibility the reflect terms the and blocks, exploration forcontracts eea gvrmn cnrl te xot f yrcros n te soitd revenue associated the and hydrocarbons of export the controls government federal The contracts. KRG the under costs recoverable of payment the also and demand) local exceeds KRG area the in (production production this for market destination the of issue the raised has this as grown, has area KRG the from production oil as relief sharper into thrown been have KRG the and government federal the between difference of areas The insuchastrategicpolicy sector. country-wideconsistent a of absence the from Iraq for arise that consequences the and which about entities should have the power and authorise to such conclude contracts the in first questions place, fundamental more to secondary are arrangements contractual to approaches appropriatethe on contract formforms).However, (or thedetailsargumentsof the about national within contracts) resource development. This production-sharing in itself is a reason to imagine that accord should be attainable and contracts (technical arrangement of contractual service types both of examples international are There former ofwhichwas producing at thetime the contract was signed. the fields, gas Chemchemal and Mor Khor the of development the for contracts service (Genel governmentbarrel,the takeper contract KRGestimatedtypical $90 been a 83%atof has on price Atoil 9. an Chevron, Total and GazpromNeft in 2012. Marathon in 2010, followed by Hess, Repsol and ExxonMobil in 2011, and stakes in existing licences acquired by largesome 2010, Since 8. international companiesoil have started to acquire KRG:in licences Murphy andOil 38 mostly to medium-size international companies. awardedKRGhas The around50 existing contracts with are notclear. companies for implications the but Iraq, of rest the in projects for rounds licensing national the in bid to allowed is area KRG the in activities with company no that Halfaya field with Petrochina) and GazpromNeft. The federal the government has made for it clear consortium the of (part have Total as area, KRG the in opportunities exploration pursue to engaged has project, I Phase Qurna West the of operatorExxonMobil, project. II Phase Qurna the stakeWest its in sold Statoil has south. the in orimplicitlypositions reviewedtheir explicitly have companies some but implementation, contract by followed been has bargaining hard and process bidding the cases, most In risk. exploration or risk price on taking not are companies that consideration the and risk technical little is there that quality and size such of are fields the expectation that the volumes, thehigh of prospect by part, in offset, is ofthis but share government; the overwhelming by theretained is thatgenerated revenue meaning the produced, oil of barrel per levels low at are fees remuneration maximum agreed The contracts. these in companies oil international with bargain hard a driven have authorities federal the that agree largelyCommentators Energy, 2011).
contractsfor hydrocarbon exploration development, and 8 The bulk of these are production-sharing World EnergyOutlook |SpecialReport 9 The KRG has also awarded also has KRG The 26/09/2012 10:07:52 017-48 Chapter 1_WeoIraq.indd 39 © OECD/IEA, 2012 who administers them, projects here could face higherlegal risk. over uncertainty with but, resources gas and oil considerable hold to thought territories these of parts with Line, Green the beyond extends presence Kurdish The constitution). the to precursor (the Law Administrative Transitional 2004 the in recognised were that straddlebordersthe “Greenthe of Line”, relating boundary a KRG-controlledto territories These territories. disputed the of that is resolved be to yet is that issue difficult Another would runcontrary to the federal claimto soleauthorityover hydrocarbon exports. buyers international to directly gas or oil market to KRG the by Efforts resolved. fully be to remain governance hydrocarbon to relating issues However,underlying payments. the region rise to 200 Augustagreementand was reached Septemberin that could seeexport volumes from the early in restarted These 2012. April in suspended were channels SOMO from via area KRG exports the a result, as and, sharing revenue of questions broader and costs for auditing mechanism appropriate the over disagreements continued from strain under came Chapter 1 | of skills across a number of areas, including procurement and project management, which situation, butitwill take considerable time. In Iraq’s energy institutions, there is a scarcity this remedy to trying is government The since. educated those and wars, multiple the of onset the before educated professionals, senior the between parity little with is evident, gap A generational many highly-trained instability. and conflict of years Moreover, the during since. country the deteriorated left Iraqis has institutions, Iraqi other with in common education system, the of quality the but world, the in graduatequalifications post- of levels capita per highest the of one had Iraq 1970s, the In Iraq. in development asan important priority by the Iraqi government. It been recognised is closely linkedhas to the broader issue of capacity human resource institutional Iraq’s improve to need The own Ministry ofNatural Resources andMinistry ofElectricity. by the adoption of new federal hydrocarbons legislation. At a regional level, the KRG has its Gas Companies, which process gas. The institutional picture could be affected substantially North and South the and products, oil and oil crude of imports and exports the manages Missan, the Midland Oil Company in Baghdad), the State Oil Marketing Organization, which South Oil Company in Basrah, the North Oil Company in Kirkuk, the Missan Oil Company in (the companies production oil state-owned regional of supervision and direction – Oil of (forthe of Oil policy making, regulatory and operational functions, including – in the case of the Ministry Energy the Ministry for Minister Prime Deputy are the to reportboth Iraq which sector), in power the (for Electricity of Ministry sector the and the energy sector) hydrocarbons for institutions key The Institutions 100 to up be to scheduled were volumes (the Ceyhan to pipeline the through exported being area KRG the from oil and government federal the by paid being producers KRG from costs for claims some in early-2011 resulted in Marketing Agreements OrganizationStateOil (SOMO). the through Iraq today:energy andtheeconomy
kb/d for the rest of 2012, accompanied by a resumption of cost recovery kb/d in 2011 and up to 175 to up and 2011 in kb/d
(Figure
kb/d in kb/d
1.17). These ministries combine ministries These 1.17). 2012). These arrangementsThese 2012). 26/09/2012 10:07:52 39 2 1 3 017-48 Chapter 1_WeoIraq.indd 40 © OECD/IEA, 2012 40 Figure 1.17 Iraq main government institutions related to the energy sector
⊳ World EnergyOutlook |SpecialReport
26/09/2012 10:07:53 * The responsibility of the Deputy Prime Minister for Energy, but with a broader remit than energy. ** Includes Central Statistics Organization. 017-48 Chapter 1_WeoIraq.indd 41 © OECD/IEA, 2012 Chapter 1 | (UN Inter-Agency Information andAnalysis Unit, 2012). areas relevant to oil exploration and production that are suspected of being contaminated any clear and survey to obliged are companies oil international government, federalwith the signed contracts of terms the Under Iraq. in ordnance unexploded and landmines of legacy a also is There capital. the around and in than lower being area, KRG the in so, moreeven and, Basrah of provincekeyoil-producing the in incidents of number the with and attention considerable expense close necessitating sector, energy the in working companies for concern in Iraq has declined markedly in recent years but the risk of violence remains an important Iraq’seconomyenergythe sectorand overall. incidentsgeneral,security In of number the The security situation has been, and will continue to be, crucial to the development of both Security Box data delays. Policy project making is and also tohampered procedural by occasionally inconsistent lead and incomplete can energy which a situation officials, senior of number small a of hands the in concentrated being issues, minor relatively on even making, decision in result can This infrastructure. energy Iraq’s of expansion and repair the to essential are implementation ofanintegrated the energy strategy. and making policy effective for essential be will data energy Iraq’s of reliability of Iraq’s energy production and use. Continued efforts to improve the consistency and pictureconsolidated a domain public the into put to and anomalies variousreconcile we have had access to a wealth of information for this report, which has allowed us to excellent to Iraqi government, co-operationThankstransport. the from waterfor and sector the electricity for (Parsons Brinckerhoff, plans 2009b and 2010), master and master plans detailed that are noware being prepared latter the of examples making: policy to inputs as completed been have that studies analytical one-off and surveys, andtothe enterprise and surveysexpenditure household Iraqiauthorities as such surveys, of number ofincreasing the the efforts to thanks improving is situation The establish withconfidence asingledataset for thewhole ofIraq. to difficult it make can which coverage and methodology in differences risking KRG, the by separately published and collected often are data that is complication further the power sector. Information on final energy consumption is generally hard to find. A outside particularly readily available, less is consumption and production gas on Data reliable, though there are still some inconsistencies in the crude and product balances. relatively are export and production oil on data that reveals research sector.Our by widely varies dataIraq’s energy of quality the but analysis, sector energy competent for point starting essential an is demand and supply energy on datarobust Obtaining (Box 1.3 1.3). ⊳
Iraq today:energy andtheeconomy Iraq energydata (Figure
1.18). The security risks are by no means uniform across Iraq, 26/09/2012 10:07:53 41
2 1 3 017-48 Chapter 1_WeoIraq.indd 42 © OECD/IEA, 2012 CO flaring). In addition, Iraq flared 11 flared Iraq addition, In flaring). 42 Iraq’s estimate We fleet. energy-relatedCO transport ageing an by consumed quality low of fuels leaded or generation) local (including generation power in products petroleum and oil crude of contamination and gas flaring in the course of oil and gas production, the extensive burning The energy sector contributes directly to the environmental challenge, be it from water/soil exacerbate thesetrends. the expected growth in the exploitation of Iraq’s natural resources all have the potential to and economy a growing migration, internal growth, Population areas. urban in pollution local to contribute all generators diesel of use extensive and plants industrial inefficient and the greater prevalence of disruption from dust and sandstorms. Transport congestion, land until it becomes barren), reduced supplies of clean water, reduced agricultural output consequences are seen in such things as desertification (the decline of arid but productive The negative impacts. had under-developed all institutional/legal have framework an and weatherChanging patterns, deforestation, poor and farming water management practices The natural environment has not been spared the degradation observed elsewhere in Iraq. Environment andwater Source: UN Inter-Agency Information andAnalysis Unit. Figure of the Tigris and Euphrates rivers, though water scarcity in Iraq is not attributable solely attributable not is Iraq in scarcity water though rivers, Euphrates and formTigris the the of in borders, its outside from come resources water Iraq’s of 60% Around Iraq. issuesin important and use water availability makes resources limited for Competition reduce environmental flaring, considerations remainsubordinate inenergy policymaking. companies internationalto contracts oil provisions in with including direction, right the in
2 Number of aacks 1 00 emissions, nearly equivalentemissions,nearly to3.7 of emissions annual the 200 400 600 800 0 0 22 1.18 700 ⊳ 2 emissions to be about 100 about be to emissions Total numberofattacksinIraq(weekly) 00 82
bcm of gas in 2010, resulting in an estimated 25 estimated an in resulting 2010, in gas of bcm 00 92 million tonnes (Mt) in 2010 (excluding gas(excluding 2010 in (Mt) tonnes million World EnergyOutlook |SpecialReport 01 0
million cars.million Despite steps 1102 2102
Mt of Mt 26/09/2012 10:07:53
017-48 Chapter 1_WeoIraq.indd 43 © OECD/IEA, 2012 develop two cases whichillustrate outcomes falling either side ofthis We have labelled the main product of our analysis of Iraq the detailed consideration ofIraq’s production outlookandpotential. more a for allow to individually modelled been haveIraq of areas resource-rich main the side, supply the On households. and industry in use energy as such limited, more is data where areas some in narrowed been has model Iraq the of scope The closed. be can grid the from demand electricity unmet of the gap when assess trajectoriesproduction to and been developed, also notably to derive assumptions about Iraq’s have GDP growth from different analysis oil quantitative for areas New supply. gas and oil of view disaggregated a more for allow to and situation energy Iraq’s of features specific some accommodate is already beingusedfor water injection. Chapter 1 | Model Energy World our of structure the analysis, this For makers.policy outcomes which might derive from today’s uncertainties and draw out the implications for economy, energy Iraq’sanalytical approach to those projections is one of that seeks to illustrate the state range of possible actual the of subsequentchapters basicprojectsectorThe might to theevolve 2035. how period the in here, presented data the on Building Projecting future developments thereare which for competing uses sources from drawn is used water the if particularly sector, power the in use water by extent, lesser a to and, production oil maintain and raise to needed vulnerable situation, particularly in the south, could be exacerbated by the water injection rainfall. Although water requirements for the energy sector are small by comparison, Iraq’s less sees and activities other all of downstream is country,which the of south the in low households these of 25% yet receive less than two hours of source,water per day (IKN, 2012). Public network water use is particularly drinking main their as network public the use households of two-thirds Nearly households. for water of shortages also are There are widespread. methods irrigation inefficient and users agricultural most for water on largest water needs, as well as the largest potential the for more far efficient use. by There is with no price sector the is Agriculture conflicts. recent water of effect existing the Iraq’sand infrastructure of state poor the by exacerbated use, water for technologies and methods inefficient to contributed has this and standards regional by high still is capita Iraq in per available water of amount the upstream: further countries of actions the to 10. For which a model for Iraq’s energy system has been developed. Iraq today:energy andtheeconomy
(see Chapter 2). In the case of the Kirkuk and Rumaila oil fields, fresh water Central Scenario ; but we also 10 a be aatd to adapted been has
scenario (Box 1.4). 26/09/2012 10:07:53 43 2 1 3 017-48 Chapter 1_WeoIraq.indd 44 © OECD/IEA, 2012 * Compoundaverage annualgrowth rates. Table for thenational economy asawhole. outcomes different produce correspondingly supply oil for projections different that way the Iraqi economy and the in sector oil the from revenues predominant of reflect the role 44 our For GDP andpopulation Box eae aeOlotu 13 46 3.3% 14.8% 4.6% 20.1% -1.3% -1.3% 11.7% Oiloutput Oiloutput -1.3% Delayed Case High Case Oiloutput Central Scenario In addition, we discuss at various points inthe text: • • • to2035 period the for projections detailed out sets outlook Iraq The period) for: and thepotential impactonglobalenergy markets. the implications ofthis case analyse for Iraq’s domestic andenergyeconomic We demand prospects, develops. sector the which at pace the as on acting constraint Scenario, significant Central a the in level the of 60% around is investment whole, as period a projection the For 2011. in seen levels the from slowly only rises sector a of findings present also We prospects andenergy demand,andthepotential impactonglobalenergy markets. economic domestic Iraq’s for infrastructure, supply energy Iraq’s in investment for the of end the by Scenario Central the than higher one-quarter aroundlevel a to further increases and 2020 by mb/d 9 surpass to rapidly rises production oil Iraqicase, this In development.sector A difficulties that couldarise. economic and political institutional, many the mind in bearing projects, and policies prospectsimplementation these projects.We the full of assessing for in arecautious and policies announced and current of assessment an Iraq’son based development, A 1.4 , in which we take a more favourable view on the prospects for energy for prospects the on viewfavourable more a take we which in High Case, eta Scenario Central 1.2 , variations in the assumptions about GDP growth growth (Table GDP about assumptions the in variations Iraq Energy Outlook,
⊳ ⊳
Overview oftheIraqCentralScenarioandcases Growth rates*forIraqioiloutputandGDPbyscenario GDP GDP GDP that reflects our judgement about a reasonable trajectory for trajectory areasonable about judgement our reflects that period. We analyse the implications of this case this of implications the analyse We period. Outlook 0021 0021 0022 2010-2035 2010-2020 2010-2015 2000-2010 .% .% 5.9% 5.9% 2.4% .%1.%13.8% 10.6% 15.1% 10.0% 2.4% 2.4% i wih netet n rqs energy Iraq’s in investment which in Delayed Case, World EnergyOutlook |SpecialReport 9.6%
(the Outlook 4.7% 1.7% 7.6% 6.4% 6.9% 5.0%
1.2) 26/09/2012 10:07:53
017-48 Chapter 1_WeoIraq.indd 45 © OECD/IEA, 2012 Figure however, Iraq remains shortofthese benchmarks. Case, Delayed the In 1980. since growth non-OECD average on based one to closer path a to back gets Iraq Case, High the In growth. annual averageEast Middle on based 1980 from path GDP overtakesnotional 2017, its around and, catchesup IraqCentralScenario, Chapter 1 | the various projections. have elected not to do we However, so as cases. this would future make different it more across difficult to assumption drawpopulation comparisons between our varying for basis the been have could persons) displaced internally of numbers significant and emigration 58 30 around from period projection the over doubles almost Iraq new generation of Iraqis will be critical. In our scenarios, we assume that the population of this afforded opportunities The of age. years fifteen under is population the of 40% than trends in Iraq; the median age is eighteen (compared with a world average of or of national institutions. This challenge is particularly important because of demographic very rapid growth in oil receipts prejudices the development of other parts of the economy that risk effectively the managing Iraq on Case, High stability. the in particularly political depend, also They and security of terms in years and recent in consolidating achieved Iraq gains the on extending contingent are here presented outlooks GDP The develops. increasesfrom providedvaluecurrent shareservices added of by Iraq’s levels as economy GDP. The in role predominant a exercise to continues of its sector oil diversification the the although economy, with progress gradual makes Iraq that cases all in assume We time lost this of some for up makes Iraq that is Case High the for more been have and Scenario Central the for assumptions would GDP our of implication The economylarge. as twice than its countries, non-OECD for average the with line in then it would have been more than 50% larger in 2010; if it had developed over this period 1980, averageEastsince Middle the rateas same the at developedIraq’s had If economy Iraq’s troubled history over the past three decades has held back its economic development.
Billion dollars (2011) million by million 20 40 60 80 0 0 0 0 0 1980 1.19
Iraq today:energy andtheeconomy
2035. The population changes that Iraq has seen in recent decades (mass decades recent in seen has Iraq that changes population The 2035. ⊳ Iraq GDPwithMiddleEast 90 0021 0023 2035 2030 2020 2010 2000 1990 Variations inIraq’sGDPgrowthbyscenario average growth Iraq GDPwithnon-OECD average growth
million in 2010 to around to 2010 in million
(Figure Delayed Case Delayed Case Central Scenario High Case
29) and more 1.19). In the In 1.19). 26/09/2012 10:07:53 45
2 1 3 017-48 Chapter 1_WeoIraq.indd 46 © OECD/IEA, 2012 46 Box was the completion of a National Development Plan for 2010 to shift this sector. manifestation of energy important the An for outlook the specifically, on and, priorities development national on both emerging, is thinking longer-termrather of evidence However, imperatives. short-term on been understandably has makers of attention policy the of much so when assess to difficult is Iraq for outlook longer-term The to which each of these challenges is overcome is very uncertain, yet critical to Iraq’s future. The extent differences. to political overcome need the effective and implementation, and heavily centralised, the need for extensive legal and regulatory reform, institutional reform management,structural reform economyan of dominatedsectorthatandis public the by security, economiceffective ensuring as such issues covering ranging, wide also are They The challenges of reconstruction are no less daunting than the scale of reconstruction itself. Policies Integrated National Energy Strategy. Iraq’sof development the in discussion for points central been have These andconcerns. environmental social of integration the and required, investments huge the of and sequencing of investments in different parts of the energy sector, the mobilisation Among the key challenges in meeting these objectives will be to ensure the co-ordination • sector: senior Iraqi policy of makers give the some indication statements of the main strategicand objectives for this Plan Development National The employment. of thenational and economy the diversification to promote and supply energy domestic reliable national for motor a as act should development,providing revenues it from export that can toused be provide secure and that is sector energy the for vision Iraqi The • • • • • such anincrease to Iraq’s economic development. of importance central the on views of divergence no but adopted, be should target what to as views different are there export; and production oil in increase rapid A to meet increasing demandfor electricityandprovide reliable, high-qualityservice. Increase power generation capacity, and improve transmission and distribution, so as to oil products of range the support agrowing Iraqi economy. provide to capacity refining modernise and Expand accommodate oilandgas development plans. Createreliable adequateand storage, transportation and export time in capacities to Efforts to replace and expand oiland gas reserves through forpower increased exploration. demand for growing to provide generation, for industrial development (suchaspetrochemicals) and for export. gas flaring, ofnon-associated in reductions gas, development and resources viaassociated of gas, supply Sufficient 1.5 ⊳
Strategic thinkingforIraq’senergysector World EnergyOutlook |SpecialReport
2014 (Ministry of Planning 26/09/2012 10:07:53 017-48 Chapter 1_WeoIraq.indd 47 © OECD/IEA, 2012 Chapter 1 | Table impact onthepower sector. gassupply,increasein anthe Central also is the thereis Scenario,as in and slowerthan is supply oil in growth the consequence, a sector.energyAs the in projects of delivery and contracting or slow co-ordination, or regulatory poor environment, political difficult more a to attributable be could This Scenario. Central the in foreseen level the of 60% around Iraq’s investmentcumulative Delayed in isCase, sector the supply overcome. energy In be might energy the of transformation rapid a to obstacles various the which at pace and overall framework,analytical but takes a generally more favourable the about view extent will affect the likelihood and speed of meeting theseaims in full. The High Case retains the that factors regulatory and logistical economic, institutional, of range a consider also We areas policy in related assumptions additional account into taking objectives, In the Central Scenario, we assume that Iraq makes substantial progress towards its declared published at the timeofwriting National Energy Strategy, co-ordinated Minister’s Prime the by been not had which Office, Integrated detailed more a on work by followed been has plan This assumptions. policy our for guidance of source important an been has sector,and energy the for vision term medium- a including areas, policy of range a for objectives contains which 2010), Iraq, of rnpr There isagradual rehabilitation of the road and networks.rail Transport An Iraqi petrochemicals industry isexpanded from 2020, andindustries suchas New refinery capacity starts to become available from 2019. Industry Refining generation Power isgiven Priority to gas use for domestic power generation, followed byindustrial use. Gas supply Slower targeted ramp-up inproduction thanimplied by current contracts, accompanied Oil supply Energy prices Policy area 1.3 ⊳ Iraq today:energy andtheeconomy
diversification. fertilisers andcement grow inline withour general assumption of gradual economic through conversions from existing gas turbines orasnew plants. Beginning in2015, combined-cycle gas turbines enter thegeneration mix, either generation mix falls. power sector asitbecomes more available domestically, while theshare ofoilinthe The relative prices of gas andoilproducts meanthat gas isusedincreasingly inthe actually supplied from thegrid. Peak demand for electricity in2011was estimated at 70%higherthantheamount Gas flaringisgradually reduced. by areview oftherequirements for individualfields(seeChapter 2) transformation sectors. of subsidy, seeking to incentivise itsuseinpower generation andintheindustrial/ The priceofgas increases slowly inreal terms, asthe government maintains the rate supply isensured. A gradual, partial removal ofsubsidies to begins electricity after fulldomestic electricity Gradual progress towards apartiallyliberalised market for oilproducts. $120/barrel (inyear-2011 dollars) in2020and$125/barrel in2035. The average IEA crudeoilimportprice–aproxy for international oilprices –rises to Main assumptionsforIraqintheCentralScenario
(Box 1.5). Assumptions
(Table 1.3). 26/09/2012 10:07:53 47 2 1 3 017-48 Chapter 1_WeoIraq.indd 48 © OECD/IEA, 2012 26/09/2012 10:07:53 049-78 Chapter 2_WeoIraq.indd 49 © OECD/IEA, 2012 Chapter 2 | • • • • • • stress onfreshwater resources. potential reduce and fields southern the to Gulf the from water bring to essential is that reduces gas flaring; but we also project rising volumes of non-associated gas ofnon-associated volumes rising production, particularlyinthenorthof Iraq. project we also but flaring; gas reduces that capacity processing gas new by bolstered Basrah, around fields oil southern from gas 9 mb/d in the Central Scenario by 2035 and 11 at mb/d in the High high, Case. Early investmentare production oil support to injection water for requirements the here but south, in the fields super-giant by mainly driven are increases production Anticipated adequate storage, and transportation and export capacity. pressure, reservoir to maintain injection for water sufficient rigs, of availability particular) will require rapid, co-ordinated progress in many areas to ensure the timely in Case High trajectories (the these Meeting 2035. in mb/d 10.5 beforeto 2020, rising in already mb/d 9 surpasses production Case, High the In 2035. in mb/d 8.3 reaches In our Central Scenario, Iraq’s oil production increases to more than 6 mb/d in 2020 and its anddeveloping stability human resource base. political in consolidating success Iraq’s and market international conditions wealth, hydrocarbon its from value long-term derive to plans Iraq how on clarity removed, are investment to impediments which at speed the by extraordinary increase in production. How this develops in practice will be determined an imply plans development field and Contracts world. the in lowest the among which are them, producing of costs the by nor resources hydrocarbon its of size the by Iraq’s ambition to and oil its expand output overgas the decadescoming limited not is to 2011 levels, as in a Delayed Case, Iraq’s oil output would rise much more slowly,reaching mb/din2020and5.32035. only 4 more much rise remaincloser would output were to oil Iraq’s Case, Delayed a in If investment as levels, 2011. 2011 to in spent billion $7 estimated the from up step large a represents This year). per billion ($24 billion $580 to rises figure this Case High the in year); per billion average$16 (an of billion $400 almost is 2012-2035 period the during investment sector gas and oil cumulative Scenario, Central the In Central Scenario and to almost 115 bcm in the High Case. The the largest in share 2035 is in associated bcm 90 almost to grow to projected is gas natural of Iraq’sproduction 2020 andbetween 750kb/d-1.2mb/din2035. in kb/d 500-800 between of production for is outlook the projections, our In growth. and federal the regional output substantial deliver to area this for possibility the between up open would governments differences current of Resolution world. the in regions exploration active most the of one now is Iraq of north the in area KRG The Iraq oilandgasresourcessupplypotential Iraq oil and gas resources and supply potential Iraq oilandgas resourcesandsupply Highlights How muchisenough? Chapter 2 26/09/2012 10:11:50 49 049-78 Chapter 2_WeoIraq.indd 50 © OECD/IEA, 2012 (O&GJ, 2011a; BP, 2012). the world and the third-largest conventional proven oil reserves after Saudi Arabia and Iran in reserves oil proven fifth-largest the Iraq gives estimate reserve new The 2011). of end Table 115 previous the than more 25% almostbarrels, Iraq’s Ministry of Oil increased its figure for the country’s proven reserves to 143 to reserves proven country’s the for figure 2010, its increased Oil October of Iraq’sMinistry In countries. oil-producing major least, greatly other or, at with compared under-explored unexplored remains of Iraq Much potential. hydrocarbons overall the of part small a only represent may and production in expansion major a support to subsurfacehydrocarbon sufficientcountry’s already its provenare The potential. reserves Iraq’s contribution to global oil supply over the coming decades is not limited by the size of 50 main hydrocarbon basinsofIraq: Eurasia created the Zagros Mountains in Iran and, to the west/southwest of that, the three rockscap keepingArabianhydrocarbons platemovementthe the towards The of place. in reservoir rocks ofavariety ofcharacteristics (bothsandstones and carbonates) and strong ancient Tethys the ocean was slowly closed, times, creating an exceptional geological combination of good source over rocks, Eurasia towards moved plate Arabian the and Africa as region: East Middle the of rest the of that to similar is Iraq of geology petroleum The Reserves andresources Oil generally more oilprone thangas prone. rivers Tigris and Euphrates the around Baghdad. The geological basin extends into Iran, Kuwait and Saudi Arabia. of It is plains alluvial the across extending (“Centre”), the fields operated by international companies are located, and Central Mesopotamia Southern Mesopotamia (referred to betweenas “South”), the basin region near this Basrah wheresplit most we of separated, geologically not Although found. been have fields super-giantIraq’s of most where is which basin, foredeep Mesopotamian The where alsoaprolific itis hydrocarbon province, inbothoiland rich gas. Iran, into continues itself foldbelt The “North”. as to referred and Zagros Northern labelled is chapter,it this in tables subsequent In Iraq. of part northern the of most in takes and east the in border Iranian the to close Regional runs It Kurdistan area. (KRG) the Government in fields the and reservoir Kirkuk super-giant the including ZagrosThe foldbelt,gentle immediatelyof folds,series mountains,west a the with of Western Desertor“West”. the referredas is to it report, this In oil-rich. than gas-richmore be to thought is and basins main three the of explored least the is It Arabia. Saudi into extending Desert, Western the with overlaps broadly west, the to Platform, Basin-Interior Widyan The 2.1 are further updated for production and new developments in the KRG area to the
billion barrels (proven reserves shown in (provenshownbarrelsreserves billion World EnergyOutlook |SpecialReport
billion 26/09/2012 10:11:50 049-78 Chapter 2_WeoIraq.indd 51 © OECD/IEA, 2012
analysis puts the level of ultimately recoverable resources at around 232 around recoverableatultimatelyresources of level the puts analysis covers many countries and regions using a consistent methodology. From this source, IEA remainder, around 55 remainder,around 200 under just of recoverableresourcesremaining for figure a leaves This 2011. of end the (crude and natural gas liquids), of which 35 resources. extent that this is not already included in the proven reserve number) and undiscovered Chapter 2 | as the primary input to the dataUSGS use weupdates; subsequent and assessment 2000 (USGS) Survey Geological Table in presented figures The uncertainty.degree of large a to subject is Iraq in resources oil recoverable ultimately of extent The Figure ilo bres ams treqatr o wih osss f rvn eevs The reserves. proven of consists which of three-quarters almost barrels, billion 2.1 Iraq oil and gas resources and supply potential Iraq oilandgas resourcesandsupply ⊳
Iraq main
billion barrels, is made up of anticipated reserve growth (to the (to growth reserve anticipated of up made is barrels, billion World Energy hydrocarbon Outlook basins billion barrels had already been produced at
2.1 are derived from the United States United the from derived are 2.1 series because it is the only source that and fields
billion barrels billion 26/09/2012 10:11:51 51
1 3 2 049-78 Chapter 2_WeoIraq.indd 52 © OECD/IEA, 2012 would bethecase today. than well successful a commercially of definition tighter much a gave price oil low a and limits technical when time a 1962, to prior drilled been had Iraq in wellsexploratory the bearing. Prior to the recent surge in exploration activity in the KRG area, more than half of historical data will increase the number of structures that may be considered hydrocarbon- of sophisticated analysis more and data seismic new likely that also is it first, drilled were structures promising most the that assume to reasonable is it Although 2011b). (O&GJ, them of 73 in found being oil with drilled, been have 113 only Iraq in means geophysical overthe reserves proven to by identified prospects potential hydrocarbon-bearing geological 530 Of adddecades. substantially coming to be expected can efforts Exploration recoverable resources, compared with23%for theMiddle East asawhole. ultimately its of 15% only produced far thus has Iraq figure, USGS conservative more the using Even 2011b). (O&GJ, country the of regions western and central in numerous are that traps stratigraphic the of examination or area KRG the in Iraq northern of parts the detailed include not study Petrolog,figure did by reached similar and 1997, a in published 52 statedthatIraq’s2010 in undiscovered resources amounted 215 tosome 143 of announcement its Alongside Iraq’s of sources Estimates other from undiscovered are resources considerably higher. oil Table and analysis. databasesIEA Oil; of Ministry Iraqi the and Survey Geological US the by IEA the to providedData Sources: presentations companyfor fieldsinthe KRG area. with supplemented Oil, of Ministry Iraqi the by provided information on based basin, by down ultimately recoverable resources greater than 5 * Southern Mesopotamian Central Mesopotamian Northern Zagros Foldbelt Total Iraq Western Desert Figures include crude oil and natural gas liquids (NGLs). Super-giant fields are defined as those with asthose defined are fields Super-giant (NGLs). liquids gas natural and oil crude include Figures West Qurna Rumaila Majnoon Zubair Nahr Umr East Baghdad Kirkuk 2.1 ⊳
Iraq (billion barrels) oil resources end-2011 Proven** reserves, 0 135 107 4 232 143 43 17 12 12 24 8 6 8 9 0
by billion barrels of proven reserves, the Ministry of Oil of Ministry the reserves, proven of barrels billion region
recoverable billion barrels. ** Ultimately resources 44 31 12 10 19 66 23 13 6 8 and World EnergyOutlook |SpecialReport production, Cumulative super-giant end-2011 Proven reserves are approximately broken 8116 18 14 17 5197 35 14 1 0 2 0 0 0 0 recoverable Remaining resources field* 43 17 12 18 49 13 8 6 8 9
billion barrels.billion A Remaining % of ultimately recoverable resources 86% 100% 99%
75%
100%
85% 98% 54% 99% 80% 98% 38% 26/09/2012 10:11:51 049-78 Chapter 2_WeoIraq.indd 53 © OECD/IEA, 2012
Figure are the fieldsthat are easiest to develop. Chapter 2 | fields (two IOC-shaded bars to the right-hand side of the figure), which are smaller heavy oil fields. Qayaraand Najma the stake,and no have companies oil international which in Kirkuk, areexceptions The 1. actively most the of one now is this government, regional the by awarded contracts the 4 around estimatecurrently at we which area, KRG the in discoveries recent from reserves proven for figure small a only includes chart This Sources: Data provided to theIEA by theIraqi Ministry ofOil; IEA databases andanalysis. 66 from data includes figure This companies. oil national = NOCs companies; oil international = IOCs Notes: factors, recovery anticipated higher with fields larger the of most include These companies. international operated by being fields in are thirds two- around reserves, remaining total the Of north. the producer,longstandingin Kirkuk, the and centre, the in Baghdad, East are fields reserve-holding main other The reserves. Rumaila, West Qurna, Zubair, Majnoon and Nahr Umr – account for 60% of the total proven (Figure 35% around of factor recovery fields exceedingthese 500 attotal oil-in-place with According to data from the Ministry of Oil, Iraq’s proven reserves are spread across 66 Neogene periods and the deeper geological layers have seen only very limited exploration. currently known reserves are almost entirely found country’s in the rocksin Iraq: of the reserves Cretaceous, the deeper Paleogene increase to or drilling opportunities offers development, fields discovered into under reservoirs from recovered ultimately is that oil of volume the increase can that recovery tertiary and secondary for techniques as well As oilfields. super-giant in found were barrels these of most and discoveries new from than For the past three decades, the world’s reserves growth has come more from known fields Recovery factor fields, butonlythelargest are indicated by name. 10% 20% 30% 40% 50% 60% 0% 05 2.2 Kirkuk Iraq oil and gas resources and supply potential Iraq oilandgas resourcesandsupply ⊳ 01 Rumaila
Iraq 00
West Qurna oil 15 02 reserves 00 25
Oil iniall Zubair 03 Halfaya by
field, 2.2). Five super-giant fields in the south of Iraq – Iraq of south the in fields super-giant Five 2.2). 00 Majnoon yi n place(billionbarrels) 35 Nahr Umr end-2011
04 Bai Hassan 00
billion barrels. This implies an averagean implies barrels.This billion billion barrels. However,barrels.of resultbillion a as 1 a reasonable indication that these that indication reasonable a 45 East Baghdad 05 00 0 25 50 75 10 12 15 0 5 0 Billion barrels o Remaining reserves p erated b NOCs IOCs reserves Produced (right axis) proven reserves Cumulave
y :
fields, 26/09/2012 10:11:51
53
1 3 2 049-78 Chapter 2_WeoIraq.indd 54 © OECD/IEA, 2012 Source: IEA analysis. by thegovernment aswell asother compensation to theoperator, suchas remuneration fees. by the operator during day-to-day production operations but excludes taxes or royalties that might be levied * Capital cost per barrel of plateau rate production capacity. ** Operating cost includes all expenses incurred 54 easy reach. relatively within facilities industrial other and yards fabrication well-established also are parts of the world, for example to the Caspian region or to fields in northern Russia. There other to many equipment heavy of bringing difficulty logistical the to contrastmarked in is access of ease This Basrah. beyond to Gulf the from up extends waterwaythat Al-Arab Shatt the via case this in equipment, in bringing for also but market, to crude the getting important onlyconsideration for an not is internationalproximity port an Such tolonger). much are routes export secondary (whereas short relatively pipelines export primary the keeping facilities, export coastal of reach easy within located all are fields southern The Table easily. quite handled and pumped be can and upgrading, specialist no requiring grade, medium a of is produced oil The facilities. other and pipelines wells, of costs the reducingterrain, flat and unpopulated relatively in located often are Basrah, around fields the of case the in as offshore and, Iraq’s Brazil. onshore deepwaterdevelopmentsin pre-salt all are fields or pressure, high very at and deep is reservoir the the where Kazakhstan, example in for field Kashagan world, the in elsewhere projects ongoing major with compared when economies of scale to their exploitation. Moreover, the geology is relatively uncomplicated giant fields being developed in the south are super- some of The the standards. international largest by in the low world, very bringing is large fields Iraq’soil developing of cost The Production costs from secondary recovery. arising and exploration future of a result as identified be toresources for allowance large 45 to amount region the in resources oil that states can be reserves proven for expected figure to increase substantially modest in the present,coming years. The the Kurdistan Regional Government world; the in regions explored aaaCnda i ad ihugaig02 100 0.25 Canadian oilsandswithupgrading Canada ad rbaGeneric expansion Saudi Arabia Iraq aahtn North Caspianoffshore Kazakhstan rzl Deepwater pre-salt Brazil 2.2 ⊳
xaso ue in suh 1.00 Mid-size (north) New super-giant (south) Expansion super giant (south) Type ofproject countries Indicative oildevelopmentandproductioncostsinselected
Scale of project (mb/d) .015 15 10 0.50 0.25 1.00 .570 0.25 .570 0.25 World EnergyOutlook |SpecialReport billion barrels. This figure includes a includes figure This barrels. billion barrel ofcapacity Capital cost* per 7 7 ($2011/bbl) 000-12 000-20 000-15 000-80 000-120 000-80 000 000 0 2-3 000 000 0 15-20 000 0 15-20 000 0 25-30 000 Operating cost** ($2011/bbl) 2-3 2 2 26/09/2012 10:11:51 049-78 Chapter 2_WeoIraq.indd 55 © OECD/IEA, 2012 f 6 rq fields, Iraqi 46 of under production-sharing contracts in the KRG area. On the basis of a detailed examination time, but also that their post-peak declines broadly coincide. In order to provide a stable a provide to order In coincide. broadly declines post-peak their that also but time, same the at production peak reach only not Baghdad) East and Kirkuk of exception the hydrocarbonforexample,mean, would Iraq’s thatIt wealth. discovered (withmajor fields whether ask to reasonable also its from value maximum Iraq’s deriving to corresponds interestin path is vertiginous a such It achievable. is pace this at expansion an whether on doubt cast – that security and logistical range institutional, a infrastructure, is – constraints there of but magnitude; this of expansion an support can base resource Iraq’s production capacity from fields covered by technical contracts services alone. position that, well before the end of the decade, Iraq should have more than 12 than more have should Iraq decade, the of end before the well that, position contracts (see Box (see contracts service technical binding in incorporated subsequently and rounds licensing the during companies international by volunteered were commitments production largest the that Given mid-2012. of as produced being 3 mb/d the times five almost 2020, by (mb/d) day 14.6 reach Iraq would in production capacity oil – envisagedschedules Chapter 2 | field development plans in place. havetestedand havebeen that those all as well as Iraq, in producingcurrently fields the all include These 4. Ministry of Oil. 3. These are the South, North, Midland and Missan oil companies, all of which are state-owned and part of the 2. The Shaikan field is currently being appraised and could come close to super-giant status. companies oil national the directlybymanaged fields operated from come would under the technical contracts service awarded in the national licensing rounds, from fields This increase years. coming the over production oil Development plans and contracts already in place imply an extraordinary increase in Iraq’s Production large by international standards Apart from the super-giant Kirkuk field, the oilfieldsinthe north are smaller (although still production capacity andtheoperating expense. straightforward and least-cost in the world, both in terms of the capital cost per unit of new diminish the fact that, from a technical perspective, oil projects in Iraq are among the more not does But this of projects. executing difficulty and cost the significantly to add can and of above, and theperformance described advantages geographical and geological the temper security institutions, Iraq’s topolitics, related ground, the above Uncertainties infrastructure andsupplylogistics, given thedistance to thenearest ports. forneed becausethe south of the in additional than nonethelesshigher is expenditure on many cases higher than are reported elsewhere in Iraq; but the cost of bringing oil to market oil. The region’s favourable geology is yielding wells with high initial oil production rates, in Iraq oil and gas resources and supply potential Iraq oilandgas resourcesandsupply 4 e on ta – f l o tee rce acrig o hi currently their to according proceed these of all if – that found we 1.2 in Chapter in 1.2 2 ), often containing 0.5 to 1.0
1), the Ministry of Oil has solid grounds for the formal the for grounds solid has Oil of Ministry the 1), 3 and from fields or prospective or heldfrom fields areas and
billion barrels of recoverable
million barrels perbarrels million
mb/d of mb/d 26/09/2012 10:11:51 55 1 3 2 049-78 Chapter 2_WeoIraq.indd 56 © OECD/IEA, 2012 Arabia between 1966and1974. Saudi of that – industry the of history the in growth sustained highest the match would Scenario well above the growth achieved in the 1970s (Figure increasesgreateroutput oil in anythingthan achieved pastthe in by Iraq, Centralthe with 9 of excess in production and export capacity. In the High Case, we examine what would be required for Iraq to reach storagetransportation, new for and pressure reservoir maintain to injected is that water for wells), and rigs (drilling activity upstream increased forinter-linked requirements the ordinated growth in investment all along the energy supply chain: we analyse, in particular, arising constraints co- a significant, any requires trajectory this of Achieving conditions. market account international from taking and Iraq of circumstances developing the in projection period, reflecting our judgement of the time required for projects the throughout toadditions be executedcapacity with progress strong on based is Scenario Central The 56 the in anticipated levels the Centralbelow Scenario, are discussed in output the concluding section of this chapter.oil bring would which investment, in delays of possibility The 5. production. oil future possible Iraq’s for trajectories detailed two developed have We resource management policies. technical service contracts will be important in determining future production profiles and the under operators and enhanced by 2012-2013 in plans submitted be to due are that field development plans redevelopment the detailed on requirements the Decisions of fields. review individual a for by accompanied be will process this that and contracts deliberations will these result in a that slower targeted anticipate ramp-up in We production than employment. implied by current and the oil development economic that to make contribution can sector the and resources national from value maximise to need the market needs, aswell asbroader considerations suchasthe country’s fiscal requirements, for projections constraints, and priorities infrastructure fields, various the at economics production characteristics and reservoir account into taking future, the strategiesfor and paths output oil optimal considering are authorities Iraqi the uncertainties, these Given Iraq. Therole ofIraq’s oilproduction inglobalmarkets is considered further inChapter 4. redundant capacity, a particularly inefficient usebecomes of scarce investmentcapacity capital in thespare case of that possibility the face could Iraq point, certain a beyond but, output, ofactual markets; global ahead of stability the for important role an play can that run capacity spare creating to capacity production allowing for arguments are There limited. be also could Iraq’s production in growth the absorb to markets international of capacity the output, back hold might that Iraqabove-groundfactors within the Alongside that could besustained for longer. one but plateau, production combined lower a reach to as so fields various the from up build- the sequencing favourof in argumentsarerevenue stream,there export long-term
mb/d by 2020. Both the Central Scenario and the High Case see Case High the and CentralScenario the Both 2020. by mb/d World EnergyOutlook |SpecialReport
2.3). Achieving the High Case 26/09/2012 10:11:51 5
049-78 Chapter 2_WeoIraq.indd 57 © OECD/IEA, 2012 there isalarge amount ofexploration underway andplanned. Chapter 2 | in the oil balance. includedare fields these from liquids naturalgas of volumes some and productionnaturalgas to fields to-find fromexplorationthe fourthblocksthe in included round.bid There however,is, largera contribution from yet- 6. This means, for example, that we have not taken into consideration possible contributions to the oil balance production levels below the range ofourprojections. down bringing potentially impact, largest the have could availability water and logistics infrastructure, to constraints related where area the also is this the – growth anticipated fast of because – but fields, southern major the for share larger even an in result could strategy lowest-costA the fromRumaila). prioritise comesto production which sourcesof of (most share present their than higher slightly 2035, in production projectedIraq’s of WestRumaila, of 4” “Big the contributeMajnoon and Zubair Qurna, moretwo-thirds than fields: southern large the from comes scenarios both in anticipated increase the of Most in “North” Table in (included area KRG the in except undiscoveredfields from sufficient to support these oil production profiles, so we have not anticipated contributions downside risks and upside potential discussed in the text. Existing discoveries are more than expressed in existing contracts, company announcements and development plans, with the breakdown by region and by field in our projections is proportional to the future ambitions political decisions, the detailed outcome of which we have not attempted to anticipate. The fields and regions. How this evolves in practice will depend on commercial negotiations and this output growth in a variety of ways, with greater or lesser contributions from individual meet to potential the has Iraq consideration, under or underway projects of volume the increase to 2020, then a slower ratea rapid of output growth thereafter toinvolves 2035 (Table basin, producing by down broken cases, both in profile production The Figure
Oil producon growth (mb/d) 0 1 2 3 4 5 6 01 2.3 Iraq oil and gas resources and supply potential Iraq oilandgas resourcesandsupply ⊳
Iraqproductionoutlookto2020incontext 2000 Russia 2 -2 008
34 Saudi Arabia 1966 -1 974 56 6 78 Years 1972 Iraq 2012 Central Scenario 2012 High Case
2.3), where 2.3), -1 -2 -2
2.3). Given 980 020 02 0
26/09/2012 13:42:30 57
1 3 2 Among the major fields: Rumaila is well positioned over the next decade to maintain its pre-eminence in Iraq and its standing as the second-largest producing field in the world, after Saudi Arabia’s Ghawar. It has a very productive main reservoir (for which the recovery factor could be well in excess of the 44% estimate from the Ministry of Oil that is used in Figure 2.2), and at least two other oil-bearing formations that have been identified but not yet developed. Its production history means that its capacities and potential are well understood and its access to export infrastructure well established. It also has more natural water support than other major fields in the region. The maximum remuneration fee per barrel, at $2 per barrel, is – along with the fee agreed for Zubair – the highest for the large southern fields. In our projections, output ranges between 1.7-2.2 mb/d in 2020 and a gradual decline starts from the mid-2020s. West Qurna is, in geological terms, a northward extension of the Rumaila field. It is split, for development purposes, by the Euphrates River, with the southern part (Phase I) contracted to a consortium led by ExxonMobil and the northern part (Phase II) by Lukoil. Thus far, there has been production only from the southern area, currently at 400 kb/d, but the combined plateau production commitments of the two phases amount to more than 4.5 mb/d. Our projections are more modest initially, at 1.5-2.5 mb/d in 2020 before reaching 3.2-4.6 mb/d in 2035, the wide range reflecting our concerns over the availability of transportation infrastructure and water for injection. There is a risk that production growth could be slowed by Statoil’s exit from the consortium operating Phase II and by uncertainty over ExxonMobil’s position in the Phase I project. Zubair was one of the first major discoveries in the region but it has remained in the shadow of its larger neighbour, Rumaila, with historical production rarely exceeding 200 thousand barrels per day (kb/d). A technical service contract for the field was awarded to a consortium led by Eni in 2009. Our projections for 2020 range from 500-750 kb/d and around 700 kb/d for 2035. Majnoon has seen only very limited production since its discovery (by Petrobras) in the 1970s. Development is complicated by the large amount of unexploded ordnance in the area, a legacy of the 1980s war with Iran. A consortium led by Shell is now working to raise production, initially to 175 kb/d (the threshold for cost-recovery payments). Shell is reportedly in negotiations with the Ministry about lowering the plateau production commitment for the field from its current 1.8 mb/d. Our projections are between 550 kb/d-950 kb/d in 2020 and 700 kb/d-1 mb/d in the 2030s. After these four super-giants, the next largest contribution in the south comes from the Halfaya field, which is located in the Missan governorate and operated by a consortium led by PetroChina. Production has started from newly built facilities, ahead of the original project schedule. We project that output from Halfaya reaches between 150-275 kb/d in 2020 and 200-325 kb/d in 2035 although, given the rapid progress thus far, these projections could well be exceeded if the connecting infrastructure to export facilities is available on time.
58 World Energy Outlook | Special Report 049-78 Chapter 2_WeoIraq.indd 59 © OECD/IEA, 2012 “Big 4”includesproduction from Rumaila, West Qurna, ZubairandMajnoon. Notes: The figures provided and discussed are for actual oil production and not for production capacity. The Chapter 2 | only rises slightly from current levels. Company Oil North the by operated areas the we from plans, production development that firm project of absence the In KRG. the by awarded contract a under operated by the North Oil Company, with the third (the Khurmala dome) being developed pace. The super-giant Kirkuk field includes three large production areas, two of which are (Box KRG the by awarded northern of Iraq’s output changes geography substantially the in our projections but with the period, rise in projection production under the contracts of end the by of one-fifth the country to north the from came 2011 (Figure in production Iraq’s of quarter a Around Table period aspartofnew natural gas developments. projection the in later produced liquids gas natural some of only consisting marginal, is the second in was offered national licensing round but did not It receive any bids. Output from the west of the country capital. the underlies that the region’s field Baghdad with progress East major super-giant anticipate not do we as back held is region this from growth Further in 2013). is expected production first (where GazpromNeft by operated 115 of plateau target its reach to 2012 in rapidly production increased (which PetroChina by operated field, Ahdab the being contributors major the 350 under remain to expected is Iraq of region central the from Production Total West North Centre Big4 South High Case Total West North Centre Big4 South Central Scenario 2.3 2.4), primarily from the Kirkuk and Bai Hassan fields. This northern share declines ⊳ Iraq oil and gas resources and supply potential Iraq oilandgas resourcesandsupply
Case Iraq oilproductionbyregionintheCentralScenarioandHigh 0121 0022 002035 2030 2025 2020 2015 2011 0121 0022 002035 2030 2025 2020 2015 2011 (mb/d) . . . . 0010.5 10.0 9.6 9.2 5.9 2.7 . . . . . 8.3 7.5 6.9 6.1 4.2 2.7 . . . . . 2.1 0.3 7.1 1.9 8.1 0.3 6.8 1.7 7.8 0.3 6.6 1.6 7.6 0.3 6.4 1.0 7.3 0.2 4.0 0.7 4.6 0.0 1.8 2.0 . . . . . 1.6 0.3 5.6 1.4 6.4 0.2 5.1 1.3 5.8 0.2 4.7 1.1 5.4 0.2 4.2 0.8 4.8 0.2 2.8 0.7 3.2 0.0 1.8 2.0 0 0
2.1). Production from other northern fields grows at a slower at grows fields northern other from Production 2.1). .100 .200 0.03 0.03 0.02 0.02 0.01 0 .100 .20.02 0.02 0.01 0.01
kb/d), and the Badra field, Badra the and kb/d),
kb/d, with kb/d, 26/09/2012 10:11:52 59 1 3 2 049-78 Chapter 2_WeoIraq.indd 60 © OECD/IEA, 2012 60 7. Production capacity in the KRG area as of mid-2012 is estimated at 250 kb/d. Box to beinearlyproduction tests by the endof2012. field (Figure are gas expected fields additional five and tests undergoing well extended is field Sarqala Mor Khor the from condensates and production) (early Tawke, ShaikanKRG: field, the Kirkukawarded by the Taq of dome Taq,Khurmala the assess the resources. There are currently five fields that are producing under contracts requiredbe will drilling orderfurther in confidentlyalthough place, in barrels oil of to discovery to date has been the Shaikan field, which could have as much as 12-15 existing and expected discoveries (ourprojections are more conservative). The largest Keystone estimates that full field development may cost up to $10 to up cost may development field full Keystone that estimates Gulf contract-holder field, Shaikan the of case the In required. are that investments government claims exclusive authority, is essential to mobilise the multi-million dollar federal the which in area an framework export, stable for A international companies. larger of operation and arrival the facilitate would it because least not term, longer the in growth output substantial deliver to area KRG the for possibility the up open payment for cost recovery and export (see Chapter 1). A harmonious resolution would and modalities the over disputes generated have sector,which hydrocarbons the of the current deadlock between the regional government and Baghdad over governance of on resolution contingent are area KRG the from production oil for projections Our to 1 production region’s the raise to ambition its stated has and oil, produce and for government has awarded regionalaround 50 contractsThe with foldbelt.international companiesZagros to explorenorthern the of subsurface faulted and folded heavily in the discoveries ofsignificant expectations high reflecting world, the in exploration the number gasand oil forintensiveareasmost the of one now than double is areaKRG early-2011),the from (more mid-2012 in wells exploration drilling rigs 23 With between 500-800 Table in “North” in (included area KRG the from oil for projections Our increments. small in only made be best, at will, investment stream, long as there is no certainty that future output can be converted into a reliable revenue to reach initial production of 100 pumping station at Fish Khabur near the Turkish border. main the to directly oil bring would that connections new through alternatively, or, of number A truck. connections around the Kirkuk area (a by link from the transportedTaq Taq field is under is construction) oil proposals mostexist to in tie existing fields mainto the Iraq-Turkey either pipeline, through and region the limited pipeline very in is infrastructure there pipeline, export Iraq-Turkey the and field Tawke link between the ofa small-capacity exception the With and production infrastructure. necessary transportation the area is place KRG in put the to needed for time the by constrained outlook also the considerations, political complex the from Aside bd y 05 bsd n xsig icvre, n to2 and discoveries, existing on based 2015, by mb/d 2.1 ⊳
Outlook foroilproductionintheKRGarea
kb/d in2020and750
kb/d through investment of around $500 kb/d-1.2 World EnergyOutlook |SpecialReport mb/d in2035. 7
2.3) see production rising to rising production see 2.3)
bd y 09 bsd on based 2019, by mb/d
billion (they hope (they billion
million). As
.) The 2.4).
billion 26/09/2012 10:11:52 049-78 Chapter 2_WeoIraq.indd 61 © OECD/IEA, 2012 Chapter 2 | to urgently reach theinitialproduction worked threshold, after which they could recover as operators costs. undertaken immediately 2009 and2010. in was work repair service contracts Substantial the technical of the signing followed that activity 2012). This is a testament to the Iraqimproving security situation and 2010 the surge in development in years: recent in sharply recorded 1 risen has Iraq in wells producing of number The required eachyear to combat natural decline andmaintain production levels. to close is requirement 900 annual average the Case, High the in while 2020 to year every 500 average, on requires, Iraq Scenario, Central the of profile the produced gather to equipment productionTo the oil. meet crude the andfromgas surface natural separate out to hydrocarbons and new wells output from in requires facilities decline existing the natural for compensating and production new on Bringing Wells andother upstream facilities Figure
kb/d. After 2020 the pace of overall output growth is lower, but more investment is investment more lower, but is growth output overall of pace the 2020 After kb/d. 2.4
526 producing wells and just a year later 1 Iraq oil and gas resources and supply potential Iraq oilandgas resourcesandsupply ⊳
Northern Iraq oil and gas fields and
695 wells, an increase of 169 (OPEC, infrastructure
kb/d of additional capacity additional of kb/d 26/09/2012 10:11:52 61
1 3 2 049-78 Chapter 2_WeoIraq.indd 62 © OECD/IEA, 2012
62 for theshort-lived peak indrillingtowards 2020. considerableparticularlychallenge, a yearsbe comingwould the crewsin drilling and rigs to more than double to 180 by 2020, before falling back. Sourcing this number of additional 2020s, before growing again towards 800 in 2035. To achieve this, the rig count would need early the growthin slowsoutput as sharply dropsback 2020, byyears comingover800 to the in quickly more much rises wells for requirement annual total the Case, High the In wells, orthe rigsrequired for these operations. There are currently around 30 workover rigsinIraq. workovers, well include not do figures These Notes: injection at oil fields, as well as for exploration activities (Figure Large numbers of wells are required, not only for oil and gas production but also for water current average, around 3 the (from decline to assumed is well new a of averageproductivity the as again increase to starts Scenario Central the meet to required wells of number the 2020s, year.the a In last ten years, the Middle East as a whole (excluding Iraq) has been adding around ten rigs the in Iraq: for task manageable still but sizeable a be would services, support and crews experienced requiring all 2020, by rigs drilling 55 of addition capacity. The production oil spare create to or 2020s), the in rapidly expands (which production gas non-associated re-deployedexploration,forbe couldfor rigs in-country required,but wells oil of number in the reduction atemporary brings profile production of the flattening the 2020, After Figure 140 to 130 around with However, manages mature. Iraq fields the as increases producers, to around of figure current the with compared 135, reach to projected is Iraq rig in the count time which by 2020, around until rise to continues needed wells of number the Well count 100 200 300 400 500 600 700 800 rigs until close to the end ofthe projection period. 0 01 05 00 0523 2035 2030 2025 2020 2015 2011 2.5 ⊳
Wells bytypeandrigcountrequiredintheCentralScenario
kb/d, to 2
kb/d) and the number of water injection wells, relative major maintenance or remedial work on existing on work remedial or maintenance major i.e. World EnergyOutlook |SpecialReport 0 25 50 75 10 12 15 17 20 0 5 0 5 0
Rig count 2.5). In the Central Scenario, Rig count(rightaxis): Well count: Oil producon Water injecon Gas producon Exploraon High Case High Case Central Scenario
80. 26/09/2012 10:11:52
049-78 Chapter 2_WeoIraq.indd 63 © OECD/IEA, 2012 Figure petroleum export products (given that oilproduct prices onthedomestic market remain subsidised). to freedom and government the by proposed those than complexes projects, potential these investorsjustify couldthat indicatedhave they that largerfavour there has been no firm commitment to the projects on offer. In order yet As to barrel. per provide fixed fee the a margins on investors based remuneration to systemof a considering also is government the while licences, operating 50-year and price export crude average by almost 750 Chapter 2 | field development project, which is expected to be offered in an upcoming licensing round. 8. The Ministry of Oil has announced plans to include construction of this refinery as part of the Nassiriyah oil * Refers to smaller-volume refinery capacity, i.e. topping plants. (140 Karbala in projects large for stages various at is work design refineries, existing the de-bottlenecking and upgrading at aimed projects to addition In demand isgrowing rapidly. domestic when a time at gasoline, particularly products, oil some key Iraq’sinto of deficit even smaller-capacity topping plants, which can be built quickly but have not made a dent 100 to expanded being (now Erbil in urgent need of upgrading. The main addition in recent years has been the 40 successful: Iraq’s three main refineries in Doura (near Baghdad), Basrah and Baiji remain in Thus far the government’s attempts in to attract large-scale rise private investment anticipated have not been the for cater to domestic required demand, with the largest is share going infrastructure to the rehabilitation oil of Iraq’s new refining sector. Iraq’s of part A Crude oilconversion andbringingoilto market (300
kb/d 1 00 1 50 2 00 2 50 kb/d) 500 0 0 0 0 0 0121 22 0523 2035 2030 2025 2020 2015 2011 2.6 8 , Kirkuk (150 Iraq oil and gas resources and supply potential Iraq oilandgas resourcesandsupply ⊳
kb/d. Legislation offers investors the possibility of both a 5% discount on the
Iraq refinery kb/d) and Missan (150 capacity kb/d), but the bulk of investment made has been in been has made investment of bulk the but kb/d), High Case in the
kb/d) that would increase refinery capacity Central Scenario
Exisng capacity: Ne Central Scenario
bd, Nassiriyah kb/d), Doura Basrah Baiji Erbil Other* wc apacity inthe
kb/d refinery
26/09/2012 10:11:52 63
1 3 2 049-78 Chapter 2_WeoIraq.indd 64 © OECD/IEA, 2012 on imports of gasoline and diesel, but does not allow for significant export of oil products. 64 infrastructure priorities. require dedicated thatexport infrastructure for sort oil products; this the would be only a longer-term of possibility given capacity other refining export-oriented large a exists create elsewhere in the Middle East. The logical place to to site such a facility would be around Basra, but it would plans no are there moment, the For 9. weather-related) can force areduction inproduction atthefields. 100 than more from directly tankers onto pumped is oil consequence, a As terminal. the bypassing pipelines interim of systems, mooring point single new the for construction, the necessitated has delay The installed. been have equipment ancillary other and pumps once 2013 in only operation large-scale begin to set is facility the but constructed, been has tanks eight of 58 of (each envisaged are tanks storage new Twenty-four fruition. to coming now only are depot this at capacity pumping and storage rebuild offshore loading to the plans and longstanding but facilities, fields onshore the between link critical a is terminal Fao The in boththeCentral ScenarioCase. andtheHigh 8 tocapacity export borne expanded pipelines linking them to onshore facilities, these projects would bring Iraq’sor new sea- with complete, Once (ABOT). Al-Basrah and (KAAOT) al-Amaya Khor at terminals systemsexistingthree withthe mooring anotherthe offshoretoadd of capacitytoexpand the and most progress, the made has commissioning of two single-point mooring systems capacity in early 2012. The Ministry of loading Oil plans crude offshore of Expansion not at thesamepace. tankers (Figure loading facilities for export offshore the and itself Fao at capacity storage and pumping available the Fao, at pumping stations that provide a connection between the fields and the main export depot main southern fields and hence production: the network of pipelines, storage facilities and the from export constrain could that chain supply the along links three are There south. in the particularly bottlenecks, infrastructure potential remove to investment additional 3.3 of peak export historical projectionsour suggest that IraqiCase), High the will in exports exceed(2014 By2017 the challenge. major another is markets international to production oil crude Iraq’s Bringing Chapter (see oil relative fuel heavy to produced gasoline of share the increasing slate, product the in improvement significant a brings projections our in capacity refinery Iraq’s of expansion and modernisation The for oil. demand domestic higher the reflecting 2020s, the throughout grow to continues of the start decommissioning forof Iraq’s smaller,the scene topping refineries (Figuresetting 2019, in thefirst operational Case, becomes refineries High new Iraq’s the of and Scenario the Central both In authorities. the by envisaged In our projections, we assume that this investment does go ahead, but later than currently thousand cubic metres,cubic thousand for totala capacity moreof 8 than
km onshore and any halt to offshore loading (which can often be can (which loading offshore to halt any and onshore km
mb/d, a level sufficient to accommodate the exports accommodateprojected theexports sufficientlevel to a mb/d,
mb/d reached in 1979, but this will depend on substantial on depend will this but 1979, in reached mb/d
2.7). All of these constraints are being addressed, but addressed, constraintsbeing arethese of All 2.7).
1). This is sufficient to reduce the country’s the reduce sufficient to relianceis This 1). World EnergyOutlook |SpecialReport
2.6). In the High Case, capacity
million barrels).million firstThe set 26/09/2012 10:11:53 9 049-78 Chapter 2_WeoIraq.indd 65 © OECD/IEA, 2012
Chapter 2 | also but Ceyhan, to route existing the of development the only not include table the (Box country the of south and north the between linkages enhanced with market, to routes of range a developing in interested is Iraq 2011. in only started options export pipeline Iraq’s on infrastructure to 2014; but this date is likely to be pushed back, as detailed feasibility work 600 current the from the to route northern the been Mediterranean port of has Ceyhan in Turkey. Iraq from Rehabilitation of export this route and oil raising its capacity for axis historical second The (see concluding fields discussion inthischapter oninstitutions and project leadtimes). majorsouthern the of potential productive the limiting avoid to integrated levelof in timely order high and a execution planning demand collectively they but implement; to difficult or complex technically is projects these of none Individually, from new fields like Halfaya and Majnoon, and a shortage of storage and pumping capacity. poor state of repair and inadequate in capacity,a in some missing are links tothat accommodate equipment output and pipelines include onshore further challenges Infrastructure Figure 2.7 Iraq oil and gas resources and supply potential Iraq oilandgas resourcesandsupply ⊳ 2.2), but it is not yet certain which routes will be developed. Options on Options developed. be will routes which certain yet not is it but 2.2),
Southern
kb/d to 1 to kb/d Iraq oil mb/d is included in the Ministry of Oil’s plan for export for plan Oil’s of Ministry the in included is mb/d and gas fields and infrastructure 26/09/2012 10:11:53 65
1 3 2 049-78 Chapter 2_WeoIraq.indd 66 © OECD/IEA, 2012 significantly after production of only around 5% of the oil-in-place (Figure oil-in-place of the 5% around of only field dropped the production after at significantly pressure reservoir of Kirkuk, case the In injection. water required to avery large natural aquifer whichhashelped to pushthe oiloutofthereservoir. was required, because its main reservoir formation (at least its southern part) is connected injectionbefore water oil-in-place its of quarter a than more produced had rate.Rumaila a high at continue to production allowed and pressure reservoir in decline the reversed initial experiment with gas injection, engineers implemented a water injection project that 66 be to needs it reservoir, the provided by injecting gasto or,connected more commonly in Iraqaquifer and around the world, by injecting water.an from example fornaturally, available not is support pressuresignificantly.reducedIf be can produced, be ultimately will that place in initially oil factor,percentageof recovery ultimate the and oil the from wellsolution otherwise of out filled, come be will to gas needs decline, rockwill ratesreservoir flow the in behind leaves it space the produced, is oil As 10. support reservoir to for injection pressure. water of sufficient availability the to tied closely are The medium-term prospects for Iraq’s oil production, from its southern fields in particular, Water requirements Box Chapter 4). Iraq’s in bymarketing 4.2 Box and oil strategyproducedevolving (see crudes rangeof the by shaped be to need Iraqfacing infrastructure choices The Sea. Red the to Arabia) Saudi rehabilitated or new capacity to the Mediterranean via Syria or, possibly, across Jordan (or equal to theinitialinvestment inlittlemore thana week. allowed Iraq to sustain exports of 2 eventthe In disruption of to an along export existing route, Strategic the if Pipeline, it 650 distanceof though it would cost around $1.5 Pipeline, Strategic new A route. export northern the with link functioning no Iraq, but is there central in refined is south the from oil some Currently, systems. different the link to a way as proposed been has network, transportation domestic the from shift oil from south to north, or vice versa. A large-capacity Strategic Pipeline, separate 2.5 to up (of capacity sizeable a routes, export of expansion this Accompanying Sea). Red the to one and Mediterranean the to one or major route through the Gulf and two pipeline routes (either both aexports: crude to marketits forto outlets independentthree least haveat the should Iraq Mediterranean, that is government the strategic of the position and reasons security and commercial for both sense makes market to routes alternative of toDevelopment markets.access forworld Hormuz of Straits the on over-reliance of risk the it with brings years anticipatedThe need large a for increase southern in export capacity over the coming 2.2 10 ⊳ Both the historicalthe mainstaysBoth Iraq’sof have Rumaila, production, Kirkuk and oil
The StrategicPipeline km), would give Iraq valuable flexibility in marketing oil export. for in Iraqflexibility its valuablegivewould km),
billion to construct (with capacity of 2.5
mb/d by switching routes, would generate revenue World EnergyOutlook |SpecialReport
mb/d) should be kept available to available kept be should mb/d)
mb/d over a 2.8). After an After 2.8). the i.e. 26/09/2012 10:11:53 049-78 Chapter 2_WeoIraq.indd 67 © OECD/IEA, 2012 Chapter 2 | 1.6 fromincreaserequirements will the oil production levels in our Central Scenario, we estimate that Iraq’s net water injection Waterrequirements Iraq’sforof most two cases. between these will fall fields oil meetTo Sources: Al-Naqib et al.(1971);Mohammed et al.(2010); IEA analysis. shown for Rumailaisfor the mainreservoir andtherefore differs from the figure fortheasawhole. field recovery the produced; factor been has that place in initially percentageRecoveryNote:oil the factorof is Figure
uses, the net water injection requirement will, obviously, rise. otherto put is waterproduced thatToextent purposes). the other or agriculture (for reuse for suitable being requiretreatmentwill beforeadditional it salts mostcases,remove tore-injected,water and in not then,oil is advantageous approach is to treat and re-inject all water,the waterproduced that is of produced netalong with the is oil. If estimatethe producedThis Iraq. in production oil across all applied is This oil. of barrel 1 of production the by created reservoir the in “space” the fill to injected 1.5, is ratio byreplacement average provided The operators. fields by southern and Iraq’sOil from of data Ministry the injection water and production on based is estimate This 11. needs for oil field injection are highest in southern Iraq (where water resources are water resources (where Iraq 9 about in southern to grow they where strained), most also are highest injection field oil for needs injection needs in 2035 equate to around 2% of the combined average flows of the Tigris the of average flows combined the of 2% around to equate 2035 in needs injection water Iraq’s total needs. water oilfield southern of bulk the provide to facility single a of operation and construction the through scale, of economies achieves it and uses; other for them freeing resources, freshwater on stress reduces it availability; water future of independent supply, water a secure provides it alternatives: sourcing water other over 100 than of aCommon the construction Iraq involve Seawater Supply Facility in southern (CSSF), which would treat seawater plans from the Gulf injection and pump waterit more Future fields inthesouth. rising to almost 16 (Figure Average reservoir pressure 100% 80% 40 60 20 0% % % %
2.9). In the High Case, the net water requirements are correspondingly greater,correspondingly are requirements water net the Case, High the In 2.9). 0 2.8 km inland for use in the oil production areas. This solution is strongly favoured strongly is solution This areas. production oil the in use for inland km Iraq oil and gas resources and supply potential Iraq oilandgas resourcesandsupply ⊳ 48
start Reservoir pressureandrecoveryfactorspriortoafterthe
mb/d for the country as a whole in 2035 and surpassing 11 of 2 62 42 32 28 24 20 16 12 water injection Years injecon
Start o mb/d in 2011 to more than 12 than moreto 2011 in mb/d wate
sinc r f e at
first the
produco Rumaila mb/d at the end of the of end the at mb/d we assume that the most economically most the that assume we i.e. n 0% 15% 30% 45% 60% 75% and
i.e. Recovery factor Kirkuk 1.5 barrels of water must be must water of barrels 1.5 Recovery Factor(r Average reservoirpressure:
mb/d in 2035. in mb/d fields Kirkuk reservoir Rumaila main Kirkuk reservoir Rumaila main period Outlook
mb/d for the ight 11 Water Water axis): 26/09/2012 10:11:53 67
1 3 2 049-78 Chapter 2_WeoIraq.indd 68 © OECD/IEA, 2012 68 CSSF the from supplied not byavailable water made surface(potentially aquifersfrom sourcedand be to is need would that Water case. this in requirements water higher behind well the lagging 2020s, the into extend would level this to building for timeline the 10 be would required capacity overall the Case, High the In 2020s. late the in the initial 2 In the Central Scenario, 8 later thaninitiallyplanned. estimate that a likely start-date for an initial 2 but project, this with progress rapid relatively CSSF, anticipate by the the we to authorities Iraqi attached importance the Given 2009). (early flow to began first water that time the to 2005) (May contract design and engineering front-end the of awarding the from 2 a was this timeline: Aramco’sSaudi Qurayyah referenceSeawaterprovidesa Expansion Plant potential forthe long. be likely to is implementation project and work engineering and design detailed for contract is set to be awarded by the government before the end of 2012, the time required from its roleas co-ordinator oftheprojectand, inearly2012althoughanew project management withdrew ExxonMobil uncertain. remains facility the of operation the for date 10-12 is CSSF the of capacity anticipated The 2013. ***Sources may includeaquifers orsurface water. 0.9 produces facility supply.The water of source current primary the is facility Ali Karmat The ** excluded. is field, Representsoil * the waterexternalsourcesfromtobrought in Figure agriculture (where water use iscurrently very inefficient). manageable, these rivers also have to satisfy other, much larger, end-use sectors, including appear sight first at might levels these at withdrawals While season. low the during combined flow their of 6% or Iraq), central in measured flows (current rivers Euphrates and
mb/d mb/d from the Shatt al-Arab waterway and there are plans in place to raise its capacity to 2.2 mb/d in mb/d 2.2 to capacity its raise to place in plans are there waterway al-Arab and Shatt the from mb/d 10 12 0 2 4 6 8 01 05 00 0523 2035 2030 2025 2020 2015 2011 2.9 mb/d) assumed to take two years to complete and the last tranche being added ⊳
Net the CentralScenario water
mb/d expansion of an existing facility and took nearly four years four nearly took and facility existing an of expansion mb/d
mb/d of CSSF capacity is required, with subsequent phases (after requirement* in mb/d phase of the CSSF is 2017, considerably
southern mb/d, to be built in phases; but the start the but phases; in built be to mb/d, World EnergyOutlook |SpecialReport Iraq produced water that is re-injectedwaterproducedis thati.e. oil fields Water source (Central): Water source(Central): Ne tw injected** injected** Current water unmet byCSSF*** Water requirements Supply Facility(CSSF) Common Seawater ater requirement: by Central Scenario High Case source
mb/d and mb/d in
26/09/2012 10:11:53
049-78 Chapter 2_WeoIraq.indd 69 © OECD/IEA, 2012 Chapter 2 | of 70% methane and 30% NGLs, of which 15% is ethane and 8% propane. 12. According to data provided by the South Gas Company, the unprocessed associated gas consists, on average, or about 1.5% of the world total (Table Iraq’s proven reserves of conventional natural gas amount to 3.4 Reserves and resources Natural gas in thevolume ofoilthat can ultimately be recovered from the fields. potential reduction a occurs, damage that reservoir point the ignored to is waterflooding if no facilities are in place to gather and process the gas, mean anincrease in flaring) and, if pressurewould, (which reservoir of falling result a gasproduction as higher include might consequences Other output. oil to raise difficult more it making and decline to rates flow fields falls (how quickly depends on the response of individual fields), thereby causing well unsupported in pressure reservoir met, not are needs injection water that extent Tothe anticipated here, would quickly create additional demands on alternative sources of water. already that CSSF, beyond the implementing and planning in Delay Scenario. Central the 5 to up Amounts south). the in facility Ali Karmat the as such facilities, existing expanding of natural gas liquids (NGLs). liquids gasnatural of north and the south of the country. Associated gas in the south has a relatively high content The composition of the gas associated with oil production varies considerably between the reserves inthesuper-giant fields of Rumaila, West Qurna, Majnoon, Nahr UmrandZubair. Iraq’s proven gas reserves are concentrated in the south, mostly as the large associated gas Geographically,gas. associated of share high the given so, done have to reasonable been have would it although reserves, oil proven of upward revision the of time the at 2010 in small number of non-associated fields. Iraq did not revise its figure for proven gas reserves Around three-quarters of these proven reserves consist of associated gas, with the rest in a been a secondary consideration for the government; but attention to gas is growing as domestic demandincreases,in particular for power generation.is growing to gas attention but government; the for consideration secondary a been sector,oil historicallythe has bygas revenues earned higher the to Due strongprospects. consideredare areas these both but west), the non-existent(in and north) the (in limited Iraq. Exploration and appraisal of these resources is at a very early stage and production is of parts western and northern the both in resources gas non-associated of potential the also but region, southern the of predominance continued the shows Iraq’sregions main the ultimately between recoverable resources for figure estimated our breakdownof The that means almostThis 40% gas.of the non-associated resources of yet toform be the found are in expected be to be to in non-associatedthought gas is fields. 30% around which of tcm, 7.9 larger, at considerably be to estimated are resources recoverable Ultimately requires treatment inorder to make thegas marketable. mb/d would be required from these sources in the High Case, considerably more than in Iraq oil and gas resources and supply potential Iraq oilandgas resourcesandsupply 12 The gas produced in the north is somewhat drier, but alsodrier, somewhatbut is north the in produced gas The 2.4), placing Iraq 13 th among global reserve-holders.
trillion cubic metres (tcm), 26/09/2012 10:11:54 69 1 3 2 049-78 Chapter 2_WeoIraq.indd 70 © OECD/IEA, 2012 ore: SS dt poie t te E b te S elgcl uvy n te rq Mnsr o Ol IEA Oil; of Ministry Iraqi the and Survey Geologicaldatabases andanalysis. US the by IEA the to provided data USGS; Sources: hundred billioncubicmetres (bcm). from the USGS data, this results in a lower non-associated gas URR, which may be underestimated by several known gas-oil-ratios. This gives and higher URR associated oil gas from URR than derived the is USGS analysis.gas associated As thefor total (URR) URRresources recoverable isUltimately derived ** Oil. of Iraqi Ministry the by provided information on based basin, by approximately down broken are reserves Proven * 70 90 almost to 2010 in (bcm) 10 than less from expected period, to projection is the over significantly and reinjection) increase venting of flaring, (net production gas marketed Iraq’s domestic industry. Iraq aims also becometo an exporter natural of projections, our In gas. its economic development, with the power sector a strong priority for gas use, followed by Iraq’s declared aim for the gas sector is to utilise a valuable domestic resource in support of Production Table associated field currently appraised in the area. The share of the south in Iraq’sgas south of the share The Central the in Scenario, 2020 before in 70% of point high back only non- a falling production rises to the area. is the in which appraised currently Siba field, field the associated from expected contribution additional an with production, oil for outlook the with aligned closely is Iraq of south the in production Gas associated gas, alone, are notsufficient to realise Iraq’s ambitions. of volumes the Case, High the and Scenario Central the in anticipated levels production oil the At fields. gas non-associated developing successfully and fields, oil southern the from mainly gas, associated of volumes rising the process and capture to infrastructure (Table Case High the in Central Mesopotamian Southern Mesopotamian Total Iraq Western Desert Northern Zagros Foldbelt Nahr Umr East Baghdad Zubair Majnoon Rumaila Non-associated Associated Kirkuk West Qurna 2.4 ⊳
Iraq gas
2.5). These projections depend on Iraq putting in place the gas the in place putting Iraq on depend projections These 2.5). resources end-2011 reserves,
Proven* bcm by 2035 in the Central Scenario, and close to 115 to close and Scenario, Central the in 2035 by bcm 2 2 2 558 3 9 379 193 2 367 700 126 334 179 388 156 203 3 3 8 550 288 838 332 876 202 4 5 5 102 154 256 435 248 993 780 0906 60 by resources** recoverable Ultimately region 2 2 4 4 5 5 7 2 1 653 9 351 298 7 505 510 279 932 158 027 139 and World EnergyOutlook |SpecialReport production, Cumulative end-2011 super-giant 9295 39 18 4 1 1 2 5 2 2 5 0 recoverable Remaining resources 3 1 1 4 4 7 1 field
375 6 100% 367 700 386 947 121 4 100% 649 773 422 906 869
billion cubic metres cubic billion (bcm) Remaining % of ultimately recoverable resources 100% 100% 92% 92%
94% 99% 88% 66% 99% 98% 40% 90%
bcm 26/09/2012 10:11:54 049-78 Chapter 2_WeoIraq.indd 71 © OECD/IEA, 2012 also ethane –are separated andused productively inthenational economy. market a it, thereis once for condensate,gasstream and, petroleum– liquefied (LPG) gas processing plants are well sized and located and that the richer components of the natural ensure that the production, capture and processing of gas proceed in a coherent way, that part of Iraq’s energy strategy. This will require integrated planning from the government to by-product more past,becomes a production, the and pivotaloil in autonomousof as and useful occasionally an that projectionsnatural be is these to ceases implication of gas The consumption. the power plants and industrial facilities that will account for the bulk of Iraq’s domestic to network transport a of development timely the require also They Case. High the in increase by more than ten times in the Central Scenario, and by more than thirteen times Our projections point to the need, over the projection period, for processing capacity to process to capacity the around8 has country the 2012, of as and, output oil in paceincreases kept with not has facilities processing gas rehabilitated or new in Iraq in Investment Chapter 2 | Table investors to exploration blocks andthedistance from majordemand centres. to attract difficulty, thus far, the by projections our in back held is production large-scale There is also a modest expansion in the west, where resources are thought to be large, but area. KRG the in particularly Iraq, of north the in aregas non-associated of sources major The rises. regions other in production non-associated gas as period projection the in later Centre South Central Scenario West Of whichassociated Total North West Centre South High Case Of whichassociated Total North 2.5 bcm of gasyear.of per bcm verylimitednationala distributionnetwork. Thereonly is ⊳ Iraq oil and gas resources and supply potential Iraq oilandgas resourcesandsupply
High Case(bcm) Iraq gasproductionbyregionintheCentralScenarioand 0021 0022 002035 2030 2025 2020 2015 2010 0021 0022 002035 2030 2025 2020 2015 2010 3 5 7 4 3 5 7 4 - - - - 34 55 62 114 59 105 58 55 92 55 51 49 89 63 53 46 13 82 18 45 42 73 10 32 41 10 13 7 9 7 - - - - . 0.5 0.5 0.3 0.3 0.5 94 347 43 40 29 73 940 39 35 31 17 32 30 12 2 4 1 1 6 7 4 10 1 9 6 26/09/2012 10:11:54 71 1 3 2 049-78 Chapter 2_WeoIraq.indd 72 © OECD/IEA, 2012 72 of almost 30 ambition to reduce gas flaring (Figure its realise can it which at pace the determine will capacity processing and gathering gas adds Iraq which at speed The up. ramps production associatedoil as available the become will all that process gas and gather to ahead task of major (much a faces produced and being flared), currently is which is that gas associated the all exploit not does Iraq Associated gas Figure around 17 of gas flared down below 4 Figure are higher, reaching apeakof25 to be added by 2020 but, because of higher projected oil output, the volumes of flared gas
bcm bcm 0 1 2 3 4 5 6 7 100 120 02 0522 22 002035 2030 2025 2020 2015 2012 20 40 60 80 0 00 0522 0523 2035 2030 2025 2020 2015 2010 2.10 2.11
bcm. In the High Case, more than 40
bcm of annual processing capacity over the coming decade brings the volume ⊳ ⊳
reduction intheCentralScenario Iraq Iraq gasproductionintheCentralScenario associated
bcm by the early 2020s, with flared volumes peaking in 2015 at
bcm in2015. gas
2.11). In the Central Scenario, the projected addition High Case processing
bcm of gas processing capacity is assumed World EnergyOutlook |SpecialReport capacity 0 4 8 12 16 20 24 28 additions bcm Central Scenario: High Non-associated gas: Associated gas: Case: South North Centre South West North and (right axis) Flaring addions capacity Processing (right axis) Flaring
flaring
26/09/2012 10:11:54
049-78 Chapter 2_WeoIraq.indd 73 © OECD/IEA, 2012 Chapter 2 | that purchases processed gas from it. 14. As well as having a 51% stake in BGC, the South Gas Company is also the entity that sells raw gas to BGC and southern fields (whether within BGC or as part of a separate arrangement). otherforcater to developed is capacity processing gas additional that and Scenario) Central our in 2020 after to process all gas from the three southern fields once their associated gas production exceeds this amount (soon gasavailable.becomevolumesadditional continuesincreasedWeif figurebeBGC couldthat This assume 13. Box by BGC. by processedgas the forpays Company Gas South price net the determine that oil, fuel from the raw gas (condensate and LPG) and on a set of formulae, linked to the price of rely on the returns it can earn from the higher value of the natural gas liquids extracted offer sufficient value to underpin the investment required. Instead, the company must themselves in not do (MBtu) unit thermal British million per $1 over just at fixed are The economic challenges BGC faces are similarly complex: low domestic gas prices (that dependent uponthetrajectory ofoilproduction. the for allow to uncertainty over the timing and volumes of future have associated gas output, both heavily decisions investment term longer BGC’s today, gas readyto flared captured of be flow a is there while Moreover, flaring). reduce to incentive image public a strong (albeit available readily make gas to incentive commercial little have contractors the so production, gas for fee remuneration a include not do BGC the to gas supplying initially fields the for contracts parties of service the different technical The involved. the interests align to is BGC the for challenge significant A meet Iraq’s to domestic needs. that required beyond available gas sufficient is there if plant export put inplace. be will infrastructure connecting the when and built be will capacity power gas-fired quickly how particular in – develops demand quickly how on dependent remains it export at world market prices. Although BGC does not itself market any gas within Iraq, substantial, primarily because gas displaces oil in power generation, freeing the oil for valueCompanynettoIraqstill paysGas the is barrel, $2/MBtu),South but morethan be essential to reach the planned throughput of 20 the by will capacity investment new increases, operatedproduction in oil as but, Company; Gas South previously Zubair al Khor and Rumaila North in plants processing two major and facilities existing 30 rehabilitate to is objective short-term The flared. currently is which of much I), Phase and Qurna West Zubair (Rumaila, fields southern three from gas associated the processing and gathering by needs Iraq’sgas of part a toanswerprovideto an designed is (5%), Mitsubishi and (44%) Shell Company(51%), Gas South the between established venture joint a (BGC), Company Gas Basrah The investment is $13 is investment 2.3 ⊳ 14 This price is higher than the domestic gas price (at an oil price of $100 per $100 of price oil an (at price gas domestic the than higher is price This
Iraq oil and gas resources and supply potential Iraq oilandgas resourcesandsupply Basrah GasCompany
billion, with the possibility of an additional $4 additional an of possibility the with billion, bcm of gas per year.
billion for an LNG an for billion 13 Total planned 26/09/2012 10:11:54 73 1 3 2 049-78 Chapter 2_WeoIraq.indd 74 © OECD/IEA, 2012 and 29 20 reaches KRG the by awarded fields from production gas total 2035, by area: KRG the fromcountry, primarily the of north the from comes output Figure exploration activityunderway. from fields that are yet to be found, in particular from the KRG area, given the high level of of these are contracted to international operators. We also make allowance for production the north in our projections), the Akkas field in the west, and the Siba field in the south. All in included (also field Mansuriyah the area,KRG Mor,the Khor Miran in and Chemchemal are time this over production to contribute anticipatedto are that fields discovered main 74 outstanding issues with the federal authorities regarding hydrocarbon governance and access to markets. ofresolution the on contingent highly is area KRG the for projection the production, oil of case the in As 15. 50 than moreto and CentralScenario 40 almost to base low very a from rises production gas Iraq’snon-associated Non-associated gas flared gas is $70 forIraq’sin oil power generation, oil allowing the be to exported, implied the this of value 110 about Centralcumulative the The the of flared yearsin Scenario during is volume gas 2012-2020
needed to encourage andrequire productive useofallIraq’s associated gas. be will measures institutional and regulatory Iraq’s Additional of fields. southernall cover (Box early additions to gas processing capacity. Thisis the objective of the Basrah Gas Company maketo can it as quickly as move to Iraqfor reason compelling a provides value lost This bcm 10 20 30 40 50 60 0 2.3), although the area of operation of this company, as currently envisaged, does not bcm in the High Case, the overwhelming majority of which is non-associated. 2.12 bcm; in the High Case, it is close to 160 to close is it Case, High the in bcm; 0022 2035 2020 2010 ⊳
billion in the Central Scenario and more than $100
Central Scenario Scenario andHighCase Iraq non-associatedgasproductionbyregionintheCentral
bcm in the High Case (Figure Case High the in bcm 0022 2035 2020 2010 World EnergyOutlook |SpecialReport
bcm. If this gas were to be substitutedbe towere gas this If bcm. High Case High Case bcm in the Central Scenario Central the in bcm
billion in the High Case.
2.12). The bulk of this of bulk The 2.12).
bcm in the in bcm North West South Centre 15
The 26/09/2012 10:11:54
049-78 Chapter 2_WeoIraq.indd 75 © OECD/IEA, 2012 Chapter 2 | 17. Government officials are reportedly considering a fifth national licensing round. in the third round helped to attract interest in these fields. 16. dollars); in the High $400 Case, this almost figure rises to to amounts almost $600 2012-2035 period and gas sector the oil during investment cumulative Scenario, the Central In of investment. levels substantial very require Case High the in so, more even and, Scenario Central the in projections The Oil andgas investment impede large-scale investment. development infrastructure and supply a vision for and togetheranticipated demand domestic bringing the levels of – sector gas the for strategy national broadly, a More use. domestic for volumes adequatesafeguard to need will they resources, gas Iraq’s in investment secure to makers bypolicy harnessed be can gas) produced the with come that liquids gas natural valuable the in (and export gas in interest evident the While 1990). since unused (but mid-1980s the in of exporting built was that Rumaila from inpipeline favour gas cross-border short a hasusing argued Kuwait to gas this which Energy, by Kuwait led consortium a to south in the field Siba the for contract the of award the is example An fixed). is remuneration their (as produced gas the of destination eventual the in stake a of less operators gives bidders, even thoughthe structure ofthetechnical contracts service on offer theoretically for consideration important an been have to appears also export of possibility the Iraq, infrastructure export gas of the border. parts to Turkish fields other Miran In and Mor Khor build Chemchemal, the from to table the on proposals provisional are there export, for prospects legal the over clarity of absence the in Even Europe. southeast to onwards Turkey’s pipelines meet fill wayto toa and as proposeddemand gas resourceshavebeen Chapter (see markets international by offered value higher the on eye an with companies from come has resources gas non-associated Iraq’s develop to impetus main the meantime, the In domestic use. for gas in investment for incentives stronger provide would price gas domestic higher a investors market-orienteda more understood.better andare time, sector Over electricity for potentialand opportunities the risks so that in prospective areas exploration activities after only being re-offered third the in slightly improved with round, terms. fields were but first licensing round, Siba) gasawarded the national (together with in wereincluded Mansuriyah and Akkas The success. mixed only enjoyed has rounds licensing far,Thus offer the of gas exploration nationaldevelopment the and opportunities through may be proposed in a future licensing round. conditions attractive More bids. received Iraq of west the in blocks exploration six the of one of which was awarded (in central Iraq to a consortium led by Pakistan Petroleum). None licensing round in 2012, seven exploration blocks considered gas-prone were on offer, only The removal of signature bonuses and changes in the valuation of petroleum and gas offtake arrangements Iraq oil and gas resources and supply potential Iraq oilandgas resourcesandsupply 4). This has certainly been the case in the KRG area, where the region’sgasthe where area, KRG the in case the been certainly has This 4). would help to clear away some of the uncertainties that uncertainties the of some away clear to help would – 17 The authorities may need to undertake prior billion (Figure
ilo (n year-2011 (in billion 2.13). A combination 16 In the fourththe In 26/09/2012 10:11:54 75 1 3 2 049-78 Chapter 2_WeoIraq.indd 76 © OECD/IEA, 2012 Figure 2011,spending in whichwas anestimated $7 76 built pipelines planned in the KRG area. infrastructuremain exceptionstothe The fields 18. fromlarger-scale individual tie-ins and are small privately responsible to theIraqi Ministry ofOil. chosen. been has approach Implementing transportation, common storage and export projects is a ordinarily taken on by entities that mean scale of economies the south the in operators, individual of although likewise responsibility is the fields. variousWater supply the exploring or developing consortia and companies the with rests this upstream, the In executing and chain varies.responsibility for the value managing stage projectseach of at However, the investment). private for looking is Iraq sector, where refining the is this to potential main upstream Iraqi exception (the the operating in companiesvarious the with for by the Iraqi treasury, either directly or via the cost recovery and fee arrangements made In our estimation, more than 90% of future investment in oil and gas will ultimately be paid more than $30 is 2020 and 2015 betweenrequired spending of level annual the where Case, High the in $20 than more is gas averageandannual investmentoil requiredof level in the when 2020, and 2015 between years the in comes peak The period. projection the over unevenly spread is requirement investment the that means capacity refining and infrastructure modernise to required thatis spending incremental the and 2020 to increases production which at speed the of
management, many of which do not have a large body of officials with the necessary the with officials of experience body or training. There largeis a complementary risk that a the companies charged with havethe not do which of many management, contract and project for responsible are that entities state various the within capacities co-ordination. The projected rate of increase in investment may stretch to the limit existing and making decision effective government on and actorsprivate and public of range a by performance good on premium a puts it – capacity export and production oil rapid in a increase achieve to is Iraq if – but itself, in unusual not is responsibilities of division This Billion dollars (2011) 12 16 20 24 0 4 8 00 05 00 0523 2035 2030 2025 2020 2015 2010 2.13
⊳ billion. These levels of investment represent a large step up from oil and gas
Iraq oilandgasinvestmentintheCentralScenario billion in the Central Scenario. This effect is even more pronounced more even is effect This Scenario. Central the in billion 18
billion. World EnergyOutlook |SpecialReport 0 10 20 30 40 50 60 0 0 0 0 0 0
Billion dollars (2011) Annual investment: 2011 Cumulave investment and Gas processing Refineries Oil producon and pipelines Oil export gas producon Non-associated Central scenario High Case -2 035 (rightaxis): p i p elines
26/09/2012 10:11:54
049-78 Chapter 2_WeoIraq.indd 77 © OECD/IEA, 2012 Chapter 2 | of contingent a sizeable addition, In award. contract of stages final the in be should or determine Iraq’s will oil that output projects to 2015 the should of already have bulk reached the a mid-2012, final investment of as decision that, is analysis this of implication The Sources: IEA analysis; Zawya database. represent the average size oftheprojects considered ineach sample. sample were excluded and the error bars show the range of completion times for the remainder. The figures decision; then from a final investment decision to the completion of a project. investment Thea final top and to bottom ITB the 5% from of invitation-to-bid); then the or ITB (the project defined a oron contractors bid to suppliers for invitation the to studies feasibility of start the from are measured periods The Notes: Figure draw firm conclusions aboutproject completion times. to enough large not was area each in size sample The region. the for untypical not were the project at times lead the decisions, orcancelled investment final reached projects where but, stage preparation re-tendered were of projects number significant a Iraq, In (Figure implement storagetransportation quicker generally gas and were to and oil four average,under on taking, surveyed projects four to two to six twoyears from firstthe feasibility study final the to investment another then and decision examined, we found that oil or gas upstream projects in the Middle East might take around 140 than more of status the examined also We Kuwait. and Emirates Arab United Qatar,the Arabia, Saudi in 2000 since tendered been have that projectsinvestment large-scale 216 involving East, Middle the across from timelines completion and preparation project of To understand the scale of the task over the coming years, we undertook a detailed analysis other investment opportunities. with compared enough, attractive is risk to reward of ratio their whether reconsider to implementation of projects may encounter a range of bureaucratic obstacles, leading them
and gas(large) and gas(mid) Upstream oi Upstream oi rjcs t aiu sae o peaain n rq tef Fr h ol n gas projects and oil the For itself. Iraq in preparation of stages various at projects Domesc pipelines Refinery Storage
years. The timeline for refinery projects in the region was similar, but with the but wassimilar, region in the projects refinery for timeline The years. 2.14 years to complete in full, with the average completion time being between three l l Iraq oil and gas resources and supply potential Iraq oilandgas resourcesandsupply 32 ⊳
Feasibility toITB in theMiddleEast Average oilandgasprojectpreparationcompletiontimes
10 $565 $863 $520 $1 183m $282 ITB to investment ITB toinvestment m m m m 12
years to complete. Projects in domestic in Projects complete. to years 34 Investment tocompleon 56 Years 2.14). 26/09/2012 10:11:55 77
1 3 2 049-78 Chapter 2_WeoIraq.indd 78 © OECD/IEA, 2012 initially remains close to the levels attained in 2011, in attained levels the to close remains initially investment gas and oil annual which in Case, Delayed a of implications the examined we risks, downside Tothe illustratespeed. expected the like anything at materialise not will significantly beyond the levels seen in 2011, the anticipated growth in oil and gas production If institutional, political or other obstacles prevent Iraq from moving oil and gas investment (often sub-optimal) tranches of investment. smaller preference for a and delays entail will framework regulatory the in uncertainties in or elements missing direction any since production, gas and positive oil in increaserapid a achieve to a order in moving be to need factors these of number large A concerns. to everyday security factors, administrative and logisticalof and politics from of questions which oil and gas investment will grow in the coming years will be affected by a wide range Realising sustained growth in investment will, nonetheless, be a constant battle. The rate at High Case. this would bring medium-term upstream capacity additions to the levels anticipated in the 78 later in the Delayed Case. occur to assumed also is generation, power forsector, energyincluding the of parts other in Investment 19. private actors shapingthe future ofIraq’s oilandgas. essential to promote co-ordination and also common endeavour among is the range sector of public hydrocarbons and the for framework legislative and vision strategic a defining with progress Further 4). Chapter see – risks macroeconomic from insulation of degree some (including implementation for environment supportive a have projects that ensure andto assessment) and environmental procurement financing, auditing, and budgeting planning, as areas such capacityto in upits capabilities build enhanced to (including projects is investment manage Iraq for keypriority a of delay, possibility the mitigate To 900 of capacity new support to commitments annual (i.e. maintained are 2012 in far thus seen commitments spending the If Scenario. Central the in anticipated output of upstream projects awarded over the period upstream project 2010-2012 is broadly consistentscale of with the levels and number The awards thus far in 2012 and 2015. is higher than the levels seen in previous years. 2014 Overall, the scale of in production in increase further a contribute to and 2013 late in on-stream come to start are to expected facilities facilities has been sanctioned, for the West Qurna (Phase II), Zubair and Badra fields. These recent contract awards shows that, so far in 2012, investment in 880 Common Seawater Supply Facility is an important example. In the upstream, our analysis of The sanctioned. be to yethave that projects important are there made, being is progress decade should be at various stages of feasibility planning. The current signs are that, while current the of part latter the trajectoryduring supply the determine will thatprojects the but reaches only 4 only reaches but rises only gradually over the period to 2035. In this case, oil production continues to grow, energy balanceandfor international markets are covered insubsequent chapters. Scenario by the end of the projection period. The implications of this case for Iraq’s domestic
mb/d in 2020 and 5.3 and 2020 in mb/d mb/d in 2035, 3 2035, in mb/d World EnergyOutlook |SpecialReport around $7 around i.e.
mb/d lower than in the Centralthe in than lower mb/d
kb/d of new upstream
billion per year,and per billion 19
kb/d), 26/09/2012 10:11:55 079-106 Chapter 3_WeoIraq.indd 79 © OECD/IEA, 2012 Chapter 3 | • • • • • • • as cement, fertiliser and petrochemicals progressively attract increased investment. such industries, energy-intensive while use, energy residential bolsters appliances 1.7 around $520billionincumulative oil export revenues. this transition, Without (CCGTs). Iraq and 2035 would in higher forego mb/d around 1.2 be demand would domestic oil gas turbines combined-cycle efficient more and predominantly oil-fired power generation mix to major use of gas, both in gas turbines plants a power from moves Iraq Gas-fired time, over 2035. and, technology generation bycost lowest the GW as emerge 80 than more reach and 2020 by quadruple extensiveAn effort installed enables gross power generation in capacity almostIraq to energy mix,withhydropower andotherrenewables playing asmallsupporting role. the dominate fuels Fossil export. for resources valuable up freeing and oil replacing generation, power for fuel main the becomes It 2035. in bcm 70 than more reaching demand with mix, Iraq’senergy in stage centre to sideshow from moves gas Natural being slightly greater thanthat ofKuwait to that ofItaly today. from growing Mtoe, 160 reaching 2035, by 2010 than higher times four than more is demand energy Iraq’s Scenario, Central the In growth. economic strong of back the on decades coming the in rapidly rise to projected is demand energy Iraq’sdomestic in Iraq, they willtriple to nearly$65billionin2035. We estimate that, if action is not taken to phase out fossil fuel consumption subsidies and almost three around 2020 from by Iraq, in cars passenger of number doubles the in increase five-fold than A 2035. by more quadruples Iraq in consumption energy End-use input to sixCCGT power plants. and thetransmission to improving goes distribution network, where efficiency 40% gains can equivalentsave the fuel annual of the under just but capacity, generation new in required is investment the of Most 2020. before needed is half but 2035, to average on year per billion $6 than more of investment requires sector powerIraq’s without disruption. outages unplanned and maintenance for allow to buffer capacity necessary the build will generation electricity catchcurrentlywith up estimated grid-based around peakdemand will it 2015,but take longer to time, on delivered is capacity new planned If mb/d in 2020 and 2 and 2020 in mb/d Iraq: fuellingfuturereconstructionandgrowth Iraq: fuellingfuture reconstruction and growth An economyreachingfullpower,butwhen?
ilo tdy udris rs i ttl i dmn t around to demand oil total in rise a underlies today, million mb/d in mb/d 2035. Pent-up demand for housing and household and Pent-uphousing for2035. demand Highlights Chapter 3 26/09/2012 12:05:19 79 079-106 Chapter 3_WeoIraq.indd 80 © OECD/IEA, 2012 80 1. Chapter 1 defines the Central Scenario, High Case and Delayed Case in more detail. develops. economy investmentIraq’sin significanta theconstraintas energy which sectoract pace at the on of levels lower that assume we where Case, Delayed our increase in in and rapid production, gas a more and oil also noting Iraqexperiences where but Case, Scenario, High Central our in our results contrasting on based trends, with an demand Itbegins energy of to 2035. overview Iraq for projections demand energy presents chapter This Overview ofenergy demandtrends Figure Italy today (60 3 Kuwait(with of thatgreater slightlythan growsbeing from to 2010 in the 6% from of going share total East its Middle in resulting neighbours, its of that outstrips Iraq in growth demand throttles back slightly as the pace of growth of oil production begins to diminish. Energy the of half second the in extent an to moderates of swift growth in hydrocarbon supply and a growing population. Energy demand growth proceedseconomy,the bythe fuelled of growthrapid reflecting times, two-and-a-half reach 2010 to in year of per phase 6% prolonged nearly by and 160 increasing new Scenario, Central a the into in growth moves strong demand energy primary total Iraq’s energy-related emissions intheHighCase andtheDelayed Case respectively. the Central with briefly examining the most significant variations in sector-level energy demand associated trends and by concludes chapter outlook The use. water and energy-relatedemissions environmental of terms in Scenario the of follows examination An buildings. and industry transport,sectors, energy end-use main the of each in prospects considers and Iraq in sector power the for outlook the of issue critical the examining by
Mtoe 10 15 20 million 50 0 0 0 0 2000
(Figure 3.1
tonnes of oil equivalentoil tonnesof ⊳
million people). 2005 3.1). Energy demand in the current decade alone grows by more than more by grows alone decade current the in demand Energy 3.1). Iraq totalprimaryenergydemandbyscenario 1
Concentrating then on the Central Scenario, the chapter continues chapter the Scenario, Central the on then Concentrating 2010
2015 (Mtoe) in 2035 – morefour– thanthan 2035 (Mtoe)higher in times 2020 16% in 2035. Iraq’s total energy demand energy totalIraq’s 2035. in 16% World EnergyOutlook |SpecialReport , as growth in the economy the in growth as Outlook, 2025 002035 2030 million people) to that ofthat to people) million Delayed Case Central Scenario High Case
26/09/2012 12:05:19
079-106 Chapter 3_WeoIraq.indd 81 © OECD/IEA, 2012 Chapter 3 | and now between that economy is energy Iraq’s examined dominate cases to overwhelmingly alternative continue the fuels fossil and Scenario Central the in theme common A more slowly. built are facilities processing gas and generation power new mixalso gradually,as more fuel changes Iraq’s and demand and energy growth economic slower in results profile growth production oil flatter the Case, Delayed the in contrast, By consumption. energy stimulate revenues gas export and higher government spending, and public oil and private consumption, resulting in the Additional greater Scenario. Central the in than higher 187 reaching decade, current the over trebles than more demand In our High Case, faster oil production growth pushes economic growth higher and energy reaching 39 reaching Scenario, oil demand in Iraq more than doubles in the next ten years, to around 1.7 there are some shifting patterns of consumption over the projection period.In the Central country,hydrocarbon-richbut this in surprise no as comes fuels fossil of dominance The Table hydropower, from generation electricity focused inthenorthofcountry, limited andasmallcontribution from other renewables. some has Iraq globally. 75% and East 2035 in mix energy fst y ls rpd bt tl sgiiat ices i cnupin in end-use sectors, in consumption 2 reaches demand oil Case, High the transport. In particularly increase still significant, but rapid, a less by offset rapid decline in oil consumption in power generation (as natural gas availability increases), and a large trends: contrasting reflecting 2020, after year per 1% over just to moderatesgrowth demand Oil sector.power the and transport by driven is growth demand 2020, Central Scenario, gas demand increases by around 10% per year on average on year per 10% around by increases demand gas Scenario, Central In all scenarios, natural gas becomes a major pillar of the domestic energy economy. In the share ofIraq’s overall energy mix. in day per barrels * Compoundaverage annualgrowth rate. Hydro Gas Oil Biomass te eeals00000103na 0.3 n.a. 0.3 0.1 0.0 0.0 Total Other renewables 2035, while it reaches only 1.6 only reaches it while 2035, 2035 3.1 (Table ⊳ billion cubic metres (bcm) in 2020 and 72 and 2020 in (bcm) metres cubic billion Iraq: fuellingfuture reconstruction and growth
2 2 exceed to on goes and 2020, by (mb/d) Iraq primaryenergydemandbyfuelandscenario(Mtoe) 3.1). In the Central Scenario, fossil fuels still account for 99% of Iraq’s of 99% for account still fuels fossil Scenario, Central the In 3.1). (58% oil, 41% natural gas), compared to 95% in the rest of the Middle the restof the in 95% naturalcomparedtogas), 41% oil, (58% 9021 0023 003*23 2035 2035 2010-35* 2035 2020 2010 1980 . . . . %1.0 4% 1.2 0.5 0.4 0.1 . . . . %0.1 8% 0.1 0.1 0.0 0.0 03 1 6 %187 6% 160 113 38 10 6 1 9 27 24 114 4% 92 75 32 mb/d in 2035 in the Delayed Case but retains a larger a retains but Case Delayed the in 2035 in mb/d 76 0 71 10% 66 37 eta cnroHg aeDelayed Case HighCase Central Scenario bcm in 2035. Natural gas accountsgas Natural 2035. in bcm mb/d in 2035. In the period to period the In 2035. in mb/d mb/d in 2020 and 2.5 and 2020 in mb/d Mtoe by Mtoe (Figure 2035 110 1.3 0.2 0.1 39 69 million – 17% – mb/d 3.2), 26/09/2012 12:05:19 81 1 3 2 4 079-106 Chapter 3_WeoIraq.indd 82 © OECD/IEA, 2012 82 the High Case, natural gas demand reaches 55 come at a considerable cost termsin of lost oilexport revenue over would theOutlook period. In this today, then to efficiency of levels similar at oil crude and oil fuel heavy burn to continuing instead Scenario, Central our in posited sector power its in gas natural to important If,implications fuels. other for for example, Iraqswitch achieve the wereto not and extent the on timing of adequate domestic depends supply (see Chapter 2). Delays on the supply side would much have strong, is demand gas natural for outlook the While Figure south, reflecting to the north the different climate conditions. from variations and (heating) peak winter smaller a conditioning), (air demand electricity in peak summer large a is there year: the through more than 40% in 2035. Within these overall figures, demand varies across the country and than less from – oil of expense the at – growingIraq’s mix energy primary the over Iraq in growth demand energy all of half around for
t lvl eo ta o te et f h Mdl Es (Figure East Middle the of rest the of that below level a at stabilising but process the in averageworld the overtaking rapidly decade, next the over In the Central Scenario, total primary energy demand per capita more than doubles in Iraq power generation ismuchless marked inthis case. and less rapid development of Iraq’s non-associated gas resources. The switch to gas use in profile) production oil flatter the to (due gasassociated of availabilitylower of result a as 42 to rising Case, Delayed the in slowly more much increases use per capita energy demandstabilises at around one-third above the globalaverage. adopted, are plants power efficient more and weaken, trends these As plant. generation oil-fired power of relatively-inefficient meeting use (including and intensive growth generally demand) unsatisfied fast demand currently of combination the to attributable Mtoe 10 15 20 50 0 0 0 0 3.2 00 00 05 0022 002035 2030 2025 2020 2015 2010 2000 ⊳
Iraq totalprimary energydemandbyfuelintheCentralScenario bcm in 2020 and around 78 World EnergyOutlook |SpecialReport 0% 25% 50% 75% 100%
period, its share of share its period, Outlook .) Te ai ices is increase rapid The 3.3). bcm in 2035, primarily 2035, in bcm Oi Gas Hydro Other renewables energy mix(rightaxis) Share ofoilinprimary l bcm in 2035. Gas 20% in 2010 to 2010 in 20% 26/09/2012 12:05:20
079-106 Chapter 3_WeoIraq.indd 83 © OECD/IEA, 2012 Figure in energy intensity seenintheCentral Scenario. structural change in energy use means it does not even achieve the level of improvements of and growth GDP of pace slower the DelayedCase, the In 2035. by CentralScenario the increase in energy demand early in the the outpaces growth economic additional Case, High the In time. that at average global gradually then improving to before demand, energy unmet of overhang the existing the in with early worsens Iraq’s while trend, improving continuing a on is China in intensity energy China, of that with comparable was level its Chapter 3 | (MER) in year-2011 dollars. ratesexchangemarket GDP,at measuredof dollars thousand per equivalent) oil of (tonnes consumed energy ashere measured is economy.It an of efficiency energy the of indicator(imperfect) an is intensity Energy 2. Note: MER=market exchange rates. intensityenergy The Figure
toe toe per thousand dollars of GDP 2035 0 1 2 3 4 ($2011,MER) 0. 0. 0. 0. 0. 0 1 2 3 4 5 (Figure 00 05 0021 0022 002035 2030 2025 2020 2015 2010 2005 2000 3.4 3.3 2000 Iraq: fuellingfuture reconstruction and growth ⊳ ⊳
3.4). Even then, Iraq’s energy intensity is more than double the projectedthe double than more Iraq’sis intensitythen, Even energy 3.4). the CentralScenario Total primaryenergydemandpercapitainselectedcountries Energy intensityinselectedcountriestheCentralScenario 2 of Iraq’s economy was nearly double the global level in 2010. While 2010. in level global the Iraq’sdouble of nearly economywas 00 2020 2010 Outlook period, but reaching a very similar level to 2035 eid a i cths up catches it as period, Outlook Worl Rest ofMiddleEast Ir Non-OECD a q
d OECD OECD World Chin Middle East Rest of Iraq
a 26/09/2012 12:05:20
83
1 3 2 4 079-106 Chapter 3_WeoIraq.indd 84 © OECD/IEA, 2012 Figure the period. Itaccounts for more than45%offinal consumptionover in2035. consumption of share largest the retains sector residential The 2035. by 2010 consumption industry’s sectors, of level the times seven end-use reaches it point, starting low three relatively a Fromfastest. increases the Of supply. available and demand between gap the of closing the and growth population growth, economic to responding 6.5% 84 grid- that estimate we delayed, not is capacity new planned the If capacity. generating concern for Iraq’s electricity sector. As a result, extensive activity is underway to build new Meeting demand for electricity with reliable and continuous supply is the main immediate reaching just under 170 level, around 33 that of 58% only satisfy to able was capacity generation electricity installed the that but 57 around Iraq was in We demand estimate electricity that Electricity demand market. electricity the reforming by and infrastructure network improving power,bygenerate to development,particular,in usedover choices fuels the sound and making technologies by social and economicfuture Iraq’sdevelop toits supports bestwaysystemthat power a in and population growth have boosted demand (see Chapter resultedthathas from under-investment war supply,damageand limiting economic while to demand relative in generation shortfall considerable the eliminating businesses, and near term, the challenge is to provide an adequate supply of grid electricity to households Developments in the power sector are of central importance to the outlook for Iraq. In the Outlook for thepower sector intheCentral Scenario
TWh 100 120 140 160 180 20 40 60 80 per year over the over year per 0 00 05 0022 002035 2030 2025 2020 2015 2010 3.5 ⊳
TWh. Final electricity consumption grows five-fold in our Central Scenario, unmet electricitydemandintheCentralScenario Iraq total TWh in 2035 period, but the rate of growth is twice this level to 2020; to level this twice is growth of ratethe but period, Outlook final 24% 40% 36% electricity (Figure 3.5). Consumption growth averages more than consumption World EnergyOutlook |SpecialReport 1). The solution adopted needs 23% 46% 31% terawatt-hours 2010, in (TWh) by sector Industry Residenal Services Unmet demand consumpon Actual totalfinal and estimated
26/09/2012 12:05:20
079-106 Chapter 3_WeoIraq.indd 85 © OECD/IEA, 2012 Figure declines rapidly oncefullgridsupplyisachieved. use their generators: diesel private on impact considerable a have would electricity grid improvementin planned the Achieving 2017. in only margin capacity 15% a achievesIraq Central the supply,in stable guarantee to order in capacity spare a margin of 10-20% have of systems electricity most Whereas plants. existing at problems technical unexpectedany and fuel of availabilityfactor,important the an is is as peak) summer the to relative (especially plants new of commissioning the of 2016. timing the until side, supply reached the On be not would equilibrium higher, 10% be to proved it if but being equal; things other all 2014, in demand peak exceed would capacity available Scenario, Central the in assumed is than and lower 10% be proved to measured demand If estimated. be only be can cannot it met, currently not is demand peak Because sides. demand Chapter 3 | many otherpartsofIraq. in than achieved there sooner be will supply likelycontinuous electricity is a thatresult,it was 45% of estimated demand. Capacity additions are continuing in the KRG area and, as a was area KRG the in supply 2.3 peak year, same the In Iraq). of rest the for GW 15.2 with 2.9 be estimated wasareato KRG the in Peakdemand country. Regional the of rest the to differently Kurdistanevolving is area KRG the in balance the supply-demand in one systems: transmission Government separate largely two has Iraq half thenew capacity added comes online after thesummerpeak. Notes:Error bars for “Required” represent Centralof ±10% Errordemand. Case bars “Available”on assume Scenario Central the in 2015 around demand peak with up catch will generation electricity based
GW GW, or over 80% of the estimated peak demand. In the rest of Iraq, peak supply in 2011 10 15 20 25 30 35 0 5 3.6 00 01 02 03 0421 0621 0821 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 (Figure Iraq: fuellingfuture reconstruction and growth ⊳ KG ae ad h ohr oeig h rs o te onr. h electricity The country. the of rest the covering other the and area (KRG)
3.6), though this date is subject to uncertainties on both the supply and supply the both on uncertainties to subject is date this though 3.6), required tomeetpeakdemandintheCentralScenario Iraq netgenerationcapacityavailableatpeakand gigawatts (GW) in 2011 (compared 2011 gigawatts in (GW) Required Availabl Scenario, 26/09/2012 12:05:20 e 85
1 3 2 4 079-106 Chapter 3_WeoIraq.indd 86 © OECD/IEA, 2012 and HFO. gasoiluse they Iraq in diesel: than other fuels of number a burning of capablegenerators Similarly,are diesel GTs.GTsoil gasthereforebetween and distinguishwe text, this In oil. crude and HFO as such fuels, liquid and generation the between technology used distinctionand the fuel it importantconsumes, which may an change over time. Gas is turbines (GTs)there can Iraq,burn natural forgas outlook sector power the Throughout 3. from refineries, crude from oilfieldsand, as required, gasoil from imports. HFO of relatively supply plentiful the naturalavailabilitygasand of of lack the giventerm, short the in fuels as advantages have also generation power in oil crude and gasoil HFO, resources budgetary government’s the on call the minimising while quickly added be can capacity of amount large a that means which costs, capital low and times construction short relatively with technologies tomeet modular are TheyIraq’s needs. immediate attractive them make that characteristics of number a possess oil burning GTs include connections between Iraq GTs andneighbouring countries. Gas HFO. or gasoil GTs. burn gasInterconnection refers tofrom converted plants GTs;CCGTsgasinclude oil fromconverted typically plants generators diesel community large or name, private their small Despite than generators. rather generators diesel grid-connected to refers diesel Large Notes:
86 gas turbines (GTs) the in Early used. technologies the in shift considerable a from 16 quickly grows plants power grid-connected of capacity gross the Scenario, Central the In Generation capacity Electricity generation o wih otat hv be sge ad h sottr gvrmn pas currently plans government place in short-term the and signed been have contracts which for Figure additions are GTs burningcrude oil, gasoil orheavy fueloil(HFO). GW 20 40 60 80 90 10 30 50 70 0 00 05 0022 002035 2030 2025 2020 2015 2010
GW in 2010 to 60 3.7 (Box ⊳ . ad Figure and 3.1
Scenario Iraq grid-connectedgrossgenerationcapacityintheCentral 3 grows quickly, reflecting projects currently under construction, projects GW in 2020, and then to 83
.) i te eid 0121, w-hrs f e capacity new of two-thirds 2011-2015, period the in 3.8): World EnergyOutlook |SpecialReport GW in 2035 period, capacity from capacity period, Outlook (Figure 3.7). There is also Gas CCGT Gas GT Oil Steam Oil GT Large diesel Hydro Interconnecon Other renewables (Table 3.2). 26/09/2012 12:05:20
079-106 Chapter 3_WeoIraq.indd 87 © OECD/IEA, 2012 Chapter 3 | annual reports; IEA analysis. Sources: Zawya and Middle East Economic Digest databases; Special Inspector General for Iraq Reconstruction Alstom. Allplants are gas turbines. manufacturer,the with directly signed was contract EPC an and Deals Mega was the fromseparately awarded Mansuryiah for contract The contract. construction and procurement engineering, an is EPC Notes: * Time elapsed from date ofaward. Box
Figure Sha Al-Basra rest ofIraq, butnotadopted successfully. the in explored been rate of has model IPP The plant. the a specific of owner the to capital on return offering and supply fuel for the responsibility with retaining area, KRGgovernment the in plants power for used structure been commercial a has as model, successfully (IPP) producer power independent the approach, Another to award theEPCcontracts was longer thantheconstruction time forthe plant itself. time taken the cases some in generation capacity: new install to required time the to considerably added have phase second this in delays Administrative turbines. the of engineering, to award procurementconstructionand undertaken then was process contracting separate a deals, under these in included turbines plants power the For Siemens. and gasGE from Deals” “Megaso-called of number large a procured Electricity of Ministry the 2008, In Iraq’s power generation capacity. in up build rapid a achieve to order in used been have approaches different Several Kirkuk (Taza) Mansuriyah Al-Khayra 3.1 Samawa Najibiya Al-Quds Ninewa 3.8 ⊳ Baiji Taji
h Iraq: fuellingfuture reconstruction and growth t ⊳ Iraq near-termsurgeinpowerprovision
Contract awarded* Expected completiontimeofselectedpowerplantsinIraq 2009
0021 0221 042015 2014 2013 2012 2011 2010 (EPC) contracts to other companies for the installationcontractsforcompaniesthe (EPC) other to EPC awarded* Construcon Operao n 500 MW 500 MW 1 014MW 1 250MW 292 MW 740 MW 750 MW 1 250MW 500 MW 160 MW
26/09/2012 12:05:20 87
1 3 2 4 079-106 Chapter 3_WeoIraq.indd 88 © OECD/IEA, 2012 projected for that year 88 100 to triples than more products generation grosselectricity fuels: liquid generation on depends and oil crude refinedfrom in growth the of most term, near the In mix. the of 33% for accounted gas Natural 2010. in generation of 57% for accounted gasoil and oil crude oil, fuel heavy fuels: liquid from primarily comes generation electricity Iraq’s current used. fuel the in shift accompanying that expected in the European Union over the same period. As noted, there is an important 50 around from grows electricity of generation gross annual Iraq’s Scenario, Central the In Generation by fuel given theirhighcosts ofgeneration relative to gas-fired technologies. technologies these of additions no are there this beyond government’splans; short-term turbine and grid-connected diesel plants are added in the period to 2016, as a result of the 44%steam additional of number a small A in input. fuel same result the generation for gross could in increase this Iraq, in 2015 to period the in installed GTs for considerably: plant of the efficiency the increase but costs capital additional CCGTsentail toGTs from Conversions soon. start to expectedSulaymaniyah, another, underway,in with is Erbil, in Some of this increase is achieved by upgrading GTs. The first32 GTthan to CCGTmore conversionto project, 2010 in zero from growing considerably, increases mix capacity the in CCGTs gas-fired of share the GTs, gas-fired in oil-fired plants are converted by 2020 to use natural gas as a fuel. In addition to the increase instead of liquid fuels. In the Central gas natural burn to converted are GTs oil-fired some as partly and (CCGTs), turbines gas natural gas occurs partly through the construction of new gas-fired driven GTs installed, and combined-cycle technologies generation the primarily by the increased in availability of natural gas to the power shift sector. This shift towards marked a is there 2015, Beyond Table Sources: Iraq ElectricityMasterplan (Parsons Brinckerhoff, 2010);IEA analysis. efficiencies achieved are lower. actual that mean may conditions operating and temperature, as such factors, under standard Environmental technology conditions. byeach attainable currently the maximum of representative are Efficiencies EPC. and expenses legal as such costs “soft” and construction during interest include costs Capital Notes: Gas turbine Combined-cycle gas turbine (CCGT) Steam turbine Diesel generator Hydro TWh in 2010 to over 200 over to 2010 in TWh 3.2 ⊳
types ofnewgenerationtechnologiesinIraq Capital (Figure costs, TWh in 2020, an increase in electricity output comparableto output electricity in increase an 2020, in TWh 3.9). efficiency, TWh in TWh Scenario, over 9 Capital cost
($/kW) 1 200 1 1 1 1 3 3 900 900 800 700 2015 – around 70% of the electricity output electricity the of 70% around – 2015 and GW – 40% of installed capacity – by 2035. by – capacity installed of 40% – GW
construction World EnergyOutlook |SpecialReport GW of GTs originally commissioned as fiinyConstruction time Efficiency 36% 57% 39% 38% n/a times for the 4-7 years 1.5 years 2.5 years 4 years 1 year main
26/09/2012 12:05:21 079-106 Chapter 3_WeoIraq.indd 89 © OECD/IEA, 2012 Chapter 3 | to limitthe help gas the CO 2010, natural In oil to generation. electricity of from impact environmentalshift the and efficiency in improvement The in non-hydro renewables, suchassolar, over theOutlookperiod fuel technologies. Due to this, and based on existing policies, there is only a small increase fossilto alternative relative high remain generation power for this exploiting of costs the largeforincreasenon-hydroa Iraq entering has Iraq.While renewables, solar, particularly flows water affect that countries other in taken decisions to sensitive is projection communities.This remote more in hydro small-scale some for potential also is there where hydroresult generation 14 reaches (nearly 2010 in supply 5 of 10% nearly up made hydropower from generated Electricity Figure on stream, reducing theshare ofHFO inrefining output. marked reduction in HFO use after 2020 occurs as upgrades to Iraq’s refining capacity come largelydue 2035,from toin 2010 42% in to30% introduction the CCGT of technology. The grows which efficiency, overall in increase an by accompanied is generation gas of share the in increase The period. the of rest the for share this retaining 2025, by 85% nearly to and then declines steadily. The share of gas increases to around 60% of the mix in 2020 and the peak demand periods. The use of liquid fuels for power generation peaks around 2015 base-load and mid-load fuel by around 2020, with oil capacity used to meet demand only in dominant the as itself establishes it that means cost, lower at fuel, a as gas of availability this trend is reversed rapidly as an increasing amount of natural gas becomes available. The below just to term near the in falls actually mix naturalshareof thatthe powergeneration meansgas the fuels in liquid expansionof This
the Iraqithe powersector was 700 442 higher than the Middle East average, which stood at 680 at stood which average,East Middle the than higher
W) Cpct i poetd o nrae oety vr the over modestly increase to projected is Capacity TWh). Share of generaon 100% gCO 20% 40% 60% 80% 0% 2 3.9 /kWh, a37%reduction andamajordecline, even by international standards. 0021 22 0523 2035 2030 2025 2020 2015 2010 Iraq: fuellingfuture reconstruction and growth ⊳
power generationintheCentralScenario Iraq electricity grammescarbondioxidekilowatt-hourof per (gCO generation TWh in 2035, with a focus in the north of the country,the of north the in focus a with 2035, in TWh by 25%. However, in the period after 2015, after period the However,in 25%. fuel and gCO 0% 10% 20% 30% 40% 50% overall 2 /kWh. By 2035, it reaches it 2035, By /kWh. eid ad s a as and period, Outlook (Box
2 Overall efficiency msin-nest of emissions-intensity efficiency 3.2). (right axis Efficiency HFO Crude oil Gasoil/diesel Gas Hydro renewables Other of 2
/kWh), ) 26/09/2012 12:05:21 89
1 3 2 4 079-106 Chapter 3_WeoIraq.indd 90 © OECD/IEA, 2012 90 Box Central Scenario, an additional 2 GW of hydro capacity is installed over the over installed is capacity hydro of GW 2 additional an Scenario, Central being an associated benefit of projects undertaken primarily for other purposes. In the generation electricity with Resources,Water of Ministry the of policies management waterthe and upstreamwatersupply of security extentand the on primarily depend will construction dam Future constrained. is availability water and capital-intensive in the KRG area, as well as some opportunities in the rest of Iraq, but projects are very hydroelectricity expanding for potential considerable is There 1990s. the in imposed of construction during the 1980s, but work was abandoned in the wake of the sanctions plants, two of which – the Bekhma and Badoush dams on the Tigris River – saw the start A number of sites have already been identified as having potential for new hydroelectric in 2010. Iraq’sin existing electricity generationof accountinggeneration mix, 5 TWh nearly for Renewable energy sources, almost all of which is hydro, play a small but important role the organisation whentheagreement is ratified. International Renewable Energy Agency (IRENA), paving the way to full membership of the convention international creating the to 2009 in signatory a became Iraq picture. the during resources biomass or wind of development large-scale any assume not does Scenario Central Our moderate. is resource biomass the and low relatively is Iraq in attractive ahighly be option for buildings if subsidies for fossil-fuel to alternatives are phased out. Wind speed likely is heating water solar sector, electricity the Outside amount ofsolarPV capacity –lessthan50MWisaddedby 2035. small a assumes CentralScenario Our fuels. fossil to compared option, high-cost very a remain will – (CSP) power solar concentrating or (PV) photovoltaics – through either generation electricity solar grid-connected resource, the of strength the Despite (MW). megawatts of tens a few of capacity with stations, research solar off-grid of number a has Technology.Electricity and of MinistryScience The of Ministry the and and sanctions). of Today, wars of Electricity Ministry by the sponsored solar research activities are decades the during significantly curtailed research was of (which history power some solar into has solar also average Iraq Iraq’s Africa. – north in example that for to Yemen similar is and irradiance Arabia Saudi in – south farther is Iraq has very good solar resources. Even though the Middle East’s best solar irradiance of the generation mix falls to around 5% by 2035. hydro’s that share means sources other from generation of growth rapid The period. 3.2 period, though international collaboration could help to change this to change help could collaboration international though period, Outlook ⊳
The roleofrenewablesinIraq World EnergyOutlook |SpecialReport Outlook 26/09/2012 12:05:21
079-106 Chapter 3_WeoIraq.indd 91 © OECD/IEA, 2012 Chapter 3 | prices, gas-fired fuel these subsidised generation base-load a as technology.generation oil than more economic is addition to In at Even price. market international their below Fuel prices for the power sector are currently set by the government at a level considerably Note: CCGT =combined-cycle gas turbine;ICE=internal combustion engine. $4 over of value a had this prices prices. In fuel domestic subsidised than rather used, fuels the of value export international the on depends therefore economy Iraqi the to generation electricity fossil-fuelled of cost full Anyfossil forused fuel power generation Iraq in that fuel is sold be cannot for Theexport. Generation costs Figure economic at international fuel prices,due to theirlower capital costs. in 2020 prices in the Central Scenario, they have a levelised cost of $77 international on Based technology. base-load cost lowest the as CCGTsemerge gas-fired and gas prices and considering the main generation oil technologies international and fuels ofnew Using available compared. in Iraq, be costs to unit fuel per costs total and the allows plants generation costs, and maintenance operational costs, fixed the Combining Iraq: per unitofenergy, oilhasaconsiderably higher export value thangas. in gas natural and fuels oil-based of value relative the by influenced strongly themselves and 2010) – is driven by the relative costs of competing generation technologies, which are Brinckerhoff, 2009a(Parsons sector power Iraqi the for the up drawn Masterplansin Electricity for provided and government the by envisaged already is which – gas natural to $22 of value market international an with generation, power in ICE Steam turbine Gas turbine CCGT Large diesel Crude oil Crude oil (Figure 3.10 2010, around 160 Gasoil HFO HFO Gas Gas Gas Iraq: fuellingfuture reconstruction and growth ⊳ 04 3.10). For plants operating only at peak periods, gas-fired GTs are the most 2020 (CentralScenario)andcurrentdomesticfuelpricesinIraq Levelised costofbase-loadplantswithinternationalfuelpricesin 0
kb/d of oil was burned in power plants; at international market 012 80 billion. By 2015, 520 2015, By billion. 01 60 Dollars perMWh(2011) kb/d of oil is expected to be used be to expected is oil of kb/d 20 per megawatt-hour (MWh) 02 billion. The planned shiftplanned The billion. 40
prices prices Internaonal prices Current domesc 26/09/2012 12:05:21
91
1 3 2 4 079-106 Chapter 3_WeoIraq.indd 92 © OECD/IEA, 2012 92 the over losses network in fall a to lead staff – engineering trainingof and infrastructure Inthe – which would include adoption of technical standards, institutional reforms for generation. fuel of use Central unnecessary and capacity generation the construction unneeded of avoiding thereby losses, system reduce should networks distribution and transmission the of operation and maintenance design, the improvingelectricity, of supplya reliable derived from be benefits to economic important wider the to addition In strategic energy partnership. proposed within a joint declaration by the European Commission and Iraq on an enhanced energy on training and researchfor Excellence of Centre the as such beyond, and sector the power in apositive role to potentialinitiatives the building play have Capacity 2010). Brinckerhoff, (Parsons network distribution the of upkeep for procedures and standards Ithas uniform sets that adopted be reform. code distribution a as institutional thatexample, for recommended, been well as staff well-trained of number large a new require demand meet will to them expanding and networks existing the of maintenance and repair the Undertaking networks. distribution and transmission the both of expansion considerable require will demand electricity in growth booming the the to repairing networks, existing addition In disconnections. frequent and levels voltage low including quality, poor of is consumers to supply the means network distribution the of condition (see Chapter 1). As well as the waste of energy associated with such losses, the degraded Losses inthe Middle East comparedthe high mostdistribution network arein countries particularly to theft of electricity. and of maintenance thelack KRG area, design, poor from outside suffering particularly degraded, seriously are networks distribution The lines between itsmaindemandcentres, suchasBaghdad, Basrah andMosul. 28 additional an around need likelyto is Iraq redundancy, of degree reasonable a with capacity, transmission enough have to and efficiency improving to primarily reliability,generation.and accommodate ordertoincreasingcapacitydemand In and new directed be to expected is investment future so attacks against them, Iraq’s transmission networks are in relatively good working condition, periodic Despite limited. very is networks transmission two the between Interconnection is served by another grid managed by the Ministry of Electricity of the federal government. Kurdistanthe in Electricity Ministryof Regional Government, restthe while country the of Iraq’s transmission network is divided into two. The network in the north is managed by the Transmission anddistribution five-fold. 1-2 from outages planned annual duration of the increaseexpectedto be may this plants,Iraqi For increasing the cost andtheamount oftime per year that has to be spent onmaintenance. and plants the of lifetime the shortening gas, than more equipment generating corrodes Oil disadvantagesseveralhavetechnicalrelativegas. to fuels liquid oil, of costsdirect the Scenario, we assume that measures to improve new and existing network existing and new improve to measures that assume we Scenario, weeks to 5-6 weeks. The cost of replacement parts is also estimated to increase estimated to also is parts replacement of cost The weeks. 5-6 to weeks 000 kilometres (km) of 400 kilovolt (kV) and 132kV and (kV) kilovolt 400 of (km) kilometres World EnergyOutlook |SpecialReport period Outlook 26/09/2012 12:05:21 079-106 Chapter 3_WeoIraq.indd 93 © OECD/IEA, 2012 such investment, but the price of electricity in Iraq is low and payment enforcement is enforcementweak payment and low is Iraq in electricity of price the but investment, such it fund Typically,to4). Chapter (see revenuekeyfundto customers’of a sourcerevenue be payments would in decreases or cost in increases to vulnerable is commitment large $8.5 averaging – 2020 to prior place take to needs investment total the of half that means demand growing rapidly meet to and under-investment past for makeupto need The period. the revenuesoverexport expected oil its of 3% around only Chapter 3 | power sector investment. of total two-fifths under little networksrepresenta Electricity period. this during capacity generationinvestmentin the of 30% up making 2035, to 2026 period concentratedthe in CCGTsnew GT-to-CCGTeither or to going share conversions.hydropowerInvestment in is almost with changes, increasing an gas-fired capacity,towards and investmentgoing investment plant power of two-thirds of pattern the 2020, From CCGTs. and GTs between quarter of the investment goes to new dedicated natural gas plants, shared almost equally A plants. peaking oil-fired as retained is it of some though fuel, a as gas use convertedto oil-fired in is capacity plant power in investment of three-quarters nearly 2020, to period the In the $140 of over investment Cumulative Investment inthepower sector equivalent to fuelinputto theannual sixCCGT power plants. 3.3 is fuel in saving associated the 2035, by 16% reaches which average, to 34% from Figure Billion dollars (2011) period Outlook 10 12 (Box 0 2 4 6 8 3.11 installations, mostly oil-fired GTs. A significant amount of this capacity islater capacity ofthis amount A significant GTs. oil-fired mostly installations, 2012 3.3). Iraq: fuellingfuture reconstruction and growth 29%. Although this figure is still considerably higher than the Middle East Middle the than higher considerably still is figure this Although 29%. -2 ⊳ 015
and electricitynetworksintheCentralScenario Iraq annualaverageinvestmentinpowergenerationcapacity (Figure 0622 0122 0623 2031 2026-2030 2021-2025 2016-2020 3.11). This is 35% higher than Iraq’s total GDP in 2010, but is but 2010, in GDP Iraq’stotal than higher 35% is This 3.11). ilo wl b rqie i te oe sco over sector power the in required be will billion -2 03 5 billion a year. This year. a billion Mtoe in 2035: in Mtoe Gas Oil Hydro renewables Other Network 26/09/2012 12:05:21 93
1 3 2 4 079-106 Chapter 3_WeoIraq.indd 94 © OECD/IEA, 2012 needed ingeneration capacity is reduced. amount ofcapitaladditional the yield export addition, revenuesinvestment (Spotlight).In that savings fuel additional in results electricity for subsidies price end-user in reduction results in a 7% reduction in the amount of generation required by the end of the period. The fuel demand by more than one-fifth by 2035. Reducing transmission and distribution losses efficiency of the power sector from 30% to 42% in technical the increase that generation) GTsforCCGTs of efficiency insteadusing from also (mainly gains are There 2035. in 10% under to 2015 in 70% over from falls generation fuel mix, as the increased availability of natural gas means that the share of oil in electricity 94 Outlook power sector by 1.2 the in demand oil lower to is subsidies,in the end-user reduced reinforcedby Scenario,Central efficiency and mix fuel technology, in changes the of impact collective the 2035, to 2015 from change not does mix generation power the which in case a with Compared Measuring thevalueofchangesinpower sector Box necessary tonecessary encourage theprivate sector to shouldermore oftheburden infuture. climate investment the create will sector the of reform staff. Successful trained retainingwell and hiring on dependent itself process a sector, electricity governed well and a stable to establish board the across be needed will implementation Effective laid for robust actiononce circumstances permit. vigorouslyremainssupply electricity while inadequate, seriously toneed plans bebut and fully collection of payment problem the to address difficult politically be will It network. the with problems from arising losses technical from electricity grid of use unofficial distinguish to present at difficult too is It payments.tracking and billing for systems technology information inadequate of because partly is comprehensive, payments not of collection and billing metered, is electricity of use customer where infrequently.Eventaken are meters have do that those for readings while metered, is not businesses and households in many consumption Electricity attention. urgent of need in issue additional an is collection payment and billing metering, Electricity standards for theuseofelectricity network. direction has been taken with the drafting of a grid code, setting out detailed technical of governance will also need to be developed and implemented. A positive step in this instruments Other complaints. consumer and disputes resolving and codes, technical enforcing participants, sector, licensing the monitoring for responsibility sector,with RegulationElectricity Law, establish electricitywould a which regulatory the office for the is second Electricity.The of Ministry the restructurewould Law, which Electricity laws relevant Two of Ministry decades. is the first The consideration. coming under currently are and drafted the been have over development its facilitate will that network, footing regulatory and the legal a on to sector electricity quickly the put to capacity way under are add efforts to need immediate the addressing Beyond 3.3 period is $520 is period ⊳
Reforming thepowersector mb/d by 2035. The cumulative export value of the fuel saved over the billion (Figure 3.12). The savings come mainly from changes in the in changesfrom mainly comesavings The 3.12). World EnergyOutlook |SpecialReport 2035; this improvement reduces overall 26/09/2012 12:05:21 © OECD/IEA, 2012 Chapter 3 Figure
gas subsidies are also expected to increase (gas subsidies increase to $5 increase subsidies (gas to increase expected are also gas subsidies natural and Electricity gradually. increases price oil international the and strongly grows demand domestic as amount, largest the by increase to next seen are the Over subsidies oil decade, trajectories. these underpinning trends distinct of number a are There $1 nearly is subsidies these of value the although $214 is costs) opportunity and (fiscal Iraq $65 nearly than rather GDP), of $35 is 2035 in subsidies of cost projected the that means phase-out partial The sectors. transformation energy and industrial in the use in and its generation encourage power to seeks government the the as that unchanged, assume we remains gas, subsidy natural of of rate case the In subsidies. oil for reduction of pattern the of level half a today in with 2035, similar to 2020 approximately from around around decline to begins electricity for rate subsidy The East. Middle the in exporters oil other for assumptions our and statements government on based period, projection the Iraq over in phase-out subsidy incomplete but partial a assume we Scenario, Central our In of elsewhere. risk a productively more is much there allocated be could list), that revenues this government of cutting (with subsidies top associated the demand the growth, at consumption energy runaway pricing moderate to market-related to the measures moves in without gradual countries that, other of suggests experience East The Middle period. projection around the was throughout 2011 levels in Iraq in to subsidies perspective fuel fossil of $22 value the that estimate We What is the potential cost of maintaining fossil fuel subsidies in Iraq? in subsidies fuel fossil maintaining of cost potential the is What Billion dollars (2011) 10 20 30 40 50 60 70 0 0
0021 0022 002035 2030 2025 2020 2015 2010 billion. While not the most pressing issue facing Iraq in the short term, the the term, short the in Iraq facing issue pressing most the not While billion.
3.12
|
Iraq: fuelling future reconstruction and growth
⊳
2035 s 2035 changes from 2015 from changes of result a as sector power the in saved fuel of value Export hows the enormous cost of maintaining subsidies at equivalent equivalent at subsidies maintaining of cost enormous the hows T H G I L T O P S
billio n (nearly 12% of GDP). The cumulative benefit to benefit cumulative The GDP). of 12% (nearly n
billio n over the the over n
trilli on over the period as a whole. a as period the over on Outlook period
billio through changes in: through changes Fuel costsavings
billio Fuel mix Plant efficiency Network losses Subsidy phase-out Scenario Central change No
n (around 6% 6% (around n (Figure n n in 2035),
3.13), 95
3 2 4 1 079-106 Chapter 3_WeoIraq.indd 96 © OECD/IEA, 2012 96 5. Direct communication with the Iraqi government. fossil-fuel subsidies ratherfuel than the international value of the lowerof fossil fuel demand. volumes lower to relate 3.12 Figure in required,powerthe resultsector.lowerin a of phase-out demand as FiguretheyareIn 3.13, captured valuethethe subsidyof as to due being as identified savings The 4. light-duty passenger are sector transport in Iraq’s in oil vehicles of consumers largest The in restraining demand growth inthissector (potentially supportingincreased oil exports). have could transport, public promoting and efficiency increasing at aimed impact that policies, new the potential indicates Italso mileage. vehicle average high comparatively and improvements economy fuel targeting policies of lack a reflects This vehicles. fewer havesignificantlyprojectedto is it though even Japan, of that greaterthan is transport in 1.2 reach to average on year per 6% by sector,increasing other any in than transport in strongly more grows demand Oil Transport Outlook for end-usesectors
reference price of gas relative to that of oil. international lower the of because burden are subsidy the lowers market which mix, generation retail domestic the on power the in productsoil replaceslargely increasingly,rates.gasNatural commercial priced, at and imports), product oil (reducing in increments online comes capacity refinery New gradually. increased be to prices the trends begin to change. Electricity demand is fully met, allowing currently very low 2020, Around fixed. remains subsidy of rate the as even referenceprices), to our derive used are (which prices fuel international increasing and demand growing to due Figure Central Scenario peaks before 2025andthendeclines gradually. 2010. Billion dollars (2011) 10 20 30 40 50 60 70 0
01 05 00 0523 2035 2030 2025 2020 2015 2011 5 Around 35% of households in Iraq have a private car, with higher shares in the in shares higher car,with private a have Iraq in households of 35% Around (PLDVs), of which there were an estimated three estimated an were there which of (PLDVs), 3.13 ⊳
Iraq fossilfuelconsumptionsubsidiesintheCentralScenario mb/d in 2035 in mb/d 4 Overall, the total value of subsidies in our (Figure World EnergyOutlook |SpecialReport 3.14). By 2035, Iraq’s oil demand Iraq’soil 2035, By 3.14). ilo o te od n Iraq in road the on million subsidies consumpon Fossil fuel phase-out without oilsubsid Addional burden subsidy phase-out without electricit Addional burden
y y 26/09/2012 12:05:22
079-106 Chapter 3_WeoIraq.indd 97 © OECD/IEA, 2012 performance of the network has since collapsed and passenger usage is only a fraction a only is usage passenger and collapsed since has network the of performance the but 1980s, the until Iraq in traffic freight and mobility personalfor channel important an provided Rail uncertain. highly is future its but Iraq for particular. opportunity an represents Rail in exports oil freight, seaborne with busy Its limited increasingly become will economic development. coastline broader of insupport transport, road and aviation Iraq is expected to increasingly open up to regional and international transport, particularly constrain growth in road transport. 0.1 at around relatively is low, density road its and modernisation and rehabilitation in pressing of need already is system road transport that Iraq’s fact the these from to arises qualification projections important An 2035. to triple than more to set also is kilometres) tonne- million (in activity freight Road age. working of population the in increase an and transport of means alternative year,limited per 7% around of growth, GDP average high 1 per 250 nearly and 2020 in at 100 vehicles per 1 per vehicles 100 at CentralStatistics high,is quite ownership ofalready vehicle Organization, The level 2012). Figure a or cycle) drive second-hand the car. on depending km, 100 per litres 9 to up of consumption fuel with is the changing, typical car imported at present is the Saipa Saba from Iran (a small vehicle 150 around – double the level in China and nine times higher than in India. Iraq relies on vehicle imports Chapter 3 | 190 than morereaching and East Middle the averageof levelthe around reaching strongly, grows Iraq 8 in PLDVs of number the Scenario, Central our In Note: PLDV =passenger light-duty vehicle. KRG
million in 2020 and over 14 PLDVs per 1 000 people 10 15 20 25 km per squareper kilometrekm surface.land of progress Slow re-buildingnetworkin this will
50 area 0 0 0 0 0 3.14 (46%) and in Baghdad (40%), and an average of 30% in other governoratesother in average 30% an of and (40%), Baghdad in and (46%) 0021 22 0523 2035 2030 2025 2020 2015 2010 Iraq: fuellingfuture reconstruction and growth 000 cars and pick-up trucks were imported in 2011 – and, while the picture the while and, – 2011 in importedwere pick-uptrucks and cars 000 ⊳
Scenario Iraq PLDVownershipandoildemandintransporttheCentral 000 inhabitants, just below the Middle East average, but more than more average,Eastbut Middle the below just inhabitants, 000 million in 2035. Vehicle penetration also increases, overtaking 000 people in 2035 in people 000 (Figure 3.15). This increase is driven by driven is increase This 3.15). 0 0. 0. 0. 1. 1. 3 6 9 2 5
PLDVs per 1 PLDVsper mb/d 1 000people PLDVs per (right axis) demand Transport oil 000 people 000 (Iraq 26/09/2012 12:05:22
97
1 3 2 4 079-106 Chapter 3_WeoIraq.indd 98 © OECD/IEA, 2012 98 an emerging boominconstruction. occur,private to beginning which is participation sectorin case a is industry stimulated by cement The sectors. industrial other to gradually spread to expected is production, gas and in oil towards alreadycontributing trendtowardsprivateparticipation, growth sector The 2035. in value-added industry total of one-quarter only for accounts sector non-oil the growth, stronger this year.Despite per 8% around of growth sees industry,which oil non- smaller much the and average, on year per 5% by grows which Iraq, in industry oil dominant the between distinguish to important is It period. projection the of remainder economyfollowsthe moregenerally,of that slowerforthethen and strongbeing2020 to growth demand industrial in trend The electricity. and liquids gas natural gas, natural of 15 over year,just reachper to In our projections, energy consumption in Iraq’s industry sector increases by more than 6% industrial energy demand. future of determinants critical the be will investmentsector private to conducive climate to future activity. The level of public investment and how far Iraq goes to create a business guide reliable any provide not do assets current a result, As assets. uncompetitive largely statistic reflects under-investment and disrepair that has left a legacy of under-utilised and 3 than moreslightly only consumed Despite industry’s habitual role as one of the foundations of an economy, in Iraq this sector Industry * Size ofbubblereflects total stock ofPLDVs. Figure traffic andindividualmobility dependent on road transport. Scenario, we assume that the railway network expands only modestly, leaving most freight Centralrequiresubstantial our investment. also In would it but region; the in projectsrail economic growth, reduce the pressure on road transport and, potentially, tolink into other facilitate to opportunity an offers network rail the of Rehabilitation level. previous the of
PLDVs per 1 000 people 35 10 15 20 25 30 50 0 0 0 0 0 0 0 0521 21 22 0523 2035 2030 2025 2020 2015 2010 2005 3.15 ⊳
Scenario PLDV ownershipandstocksinselectedcountriestheCentral Mtoe in 2035 in Mtoe Mtoe in 2010, around the same level as in 1990. This 1990. in as level same the around 2010, in Mtoe (Figure World EnergyOutlook |SpecialReport 3.16), with consumption being a mix a being consumption with 3.16), PLDV stocks*: PLDV stocks*: South Africa Iraq Middle East Rest of Chin Indi 100 million 50 million 10 million a a 26/09/2012 12:05:22
079-106 Chapter 3_WeoIraq.indd 99 © OECD/IEA, 2012 Chapter 3 |
Figure 3.16 Iraq domestic energy balance* in the Central Scenario, 2035 (Mtoe)
⊳ Iraq: fuellingfuture reconstruction and growth
*Oil exports, oil product exports/imports and electricity imports not shown. Gas flaring not shown. ** Includes losses and fuel consumed in oil and gas 26/09/2012 12:05:22
99 production, generation lost or consumed in the process of electricity production, and transmission and distribution losses. 1 3 2 4 079-106 Chapter 3_WeoIraq.indd 100 © OECD/IEA, 2012 move beyond basiccommodities. while also illustrating the long time required to develop higher value-added sectors and to Saudi petrochemical sector by SABIC is a good the example of of development the challenges The and feedstock. opportunities, of availability long-term secure the to as confidence investment long-term significant and on depend will Iraq in petrochemicalindustry the of up build successful a sectors, other many in As markets. global and regional in position a time to develop, particularly given other investment priorities and the challenge of gaining is expected to grow. However, Iraq’s existing petrochemicals sectora petrochemical is very small and supporting industry willselling particularly into take of Asian markets, where capable petrochemical and fertiliser fully demand ethane of supplies ample have would Iraq place, in are processing facilities once that, suggest projections Our costs. input low from advantagecomparative derive to sector,hydrocarbonseeking country’s the to value add and use can that infrastructure industrial up building of objective policy the adopted has 100 would bring Iraq’s petrochemical output to a level greater than that of Qatar today. This plants. processing downstream and fractionators) (pipelines, infrastructuremidstream additional as well asethane), 100% at (running productioncrackerslarge-scale ethyleneforthree investment in implies This 6. generallynow below computer, a owning households of proportion the example, for alongwith goods; consumer other of consumption, a key component will remain conditioning Air often. more them greaterusing a and rangebuying appliances households of with demand, toboost a sectorgrowsgives Improvedelectricity tofrom58%. grid-based 35% cheaper reliability of buildings the in consumed energy total in electricity of share the Scenario,Central the In bills, andlessinvestment inpower generation capacity would be needed. therefore lower and consumption electricity in lower have then could Consumers area. this locking than rather standards, efficiency inefficiency in capital stock that has a long lifetime. energy International standards already exist in high incorporate to opportunity or underconstruction. Thissignificant level of expected construction creates animportant units 1 between of short currently is Iraq ownership. appliance burgeoning and supply housing new urbanisation, growth, economic and population are 19 services and agriculture sectors), sees demand increase from residential, around the 7 includes it analysis, this (for sector buildings the Scenario, Central our In Buildings andothersectors 5 nearly togrows In the Central Scenario, demand for hydrocarbon feedstock for fertiliser and petrochemicals conditioning, isanobviousconditioning, priority. the introduction of energy performance standards for household appliances, especially air Mtoe in Mtoe (Ministry of Planning, 2010). Several large-scale housing projects are either planned either areprojects Several large-scalehousing 2010). Planning, of (Ministry 2035. The main factors underpinning the projected increase in consumption in increase projected the underpinning factors main The 2035. Mtoe in 2035, in Mtoe 20% (IKN, 2012), is expected to increase. As with building standards,building with expectedAs increase.tois 2012), (IKN, 6 with growth concentrated in the period after 2020. Iraq 2020. after period the concentratedgrowthin with World EnergyOutlook |SpecialReport million and 3.5 and million Mtoe in 2010 to over million housing million 26/09/2012 12:05:22 079-106 Chapter 3_WeoIraq.indd 101 © OECD/IEA, 2012 grow to account for nearly for account to grow global economy and 0.7% share of the global population. The increase in CO in increase The population. global the of share 0.7% and economy global the of 0.3% Iraq’s to compared figure high a – emissions global of 1% than more little a Chapter 3 | 7. Figures for energy-related CO 2035 by in energy of lack a and world the in carbon-intensive economies most the technologies of one Iraq made efficiency standards, out-of-date with together fuels, fossil on Reliance Iraq’senergy-related CO Energy-related emissions Environment to anet exporter. importer LPG an being fromcapacity, movesprocessing Iraq gasnatural increased to due when, decade this of end the around until continue to projected is this and yearsseveral demand to remain strong, reaching more than 210 LPG project we and Iraq in fuel cooking a as used widely is (LPG) petroleum gas Liquefied
Figure emissions (seeChapter 4 below to down coming time, over reduces flaring Gas subsidies. electricity and fuel in reduction gradual a and plants power efficient more to move a growth, economic lower of result a as 2020, after slows effect from reduced flaring of natural gas that is anticipated in the early years of the projection period. around 100 around in electricity generation, as natural gas displaces liquid fuels. The projected reduction in reduction projected The fuels. liquid displaces gas natural as generation, electricity in mix fuel shifting the is these of important most The role. a play also consumption energy of Iraq’s economy (based on investment in modern equipment), but changes in patterns of
2010. However, Iraq’s carbon intensity is set to improve significantly, falling by a quarter Gt 0.5 1.0 1.5 2.0 2.5 0 3.17 (Figure 0021 0023 2035 2030 2020 2010 2000 million tonnes (Mt) in 2010 to just over 400 Mt in 2035 (Figure 2035 in Mt 400 over just to 2010 in (Mt) tonnes million Iraq: fuellingfuture reconstruction and growth ⊳ 3.18). This improvement is related mainly to the rapid growth in the size the in growth rapid the to mainly related is improvement This 3.18).
Middle EastemissionsintheCentralScenario Iraq energy-relatedCO 2). 2 emissions are projected to increase in the Centralfromthe Scenario projectedare in increase to emissions 2 emissions cover only the productive use of energy and so do not capture the 17% of Middle East energy-relatedEastCO Middle of 17% bcm by the early 2020s, resulting in a reduction in related in reduction a in resulting 2020s, early the by bcm 2 emissionsbyfuelanditsshareof kb/d in 2035. Iraq has imported LPG for 0% 5% 10% 15% 20% 25% 2 emissions in 2035 and 2035 in emissions CO energy-related total MiddleEast Iraq asshareof Iraq -oi Iraq -ga Rest ofMiddleEast (right axis) 2 emissions
3.17). 2 emissions l s 7 They 26/09/2012 12:05:23 101
1 3 2 4 079-106 Chapter 3_WeoIraq.indd 102 © OECD/IEA, 2012 Figure efficiency standards for vehicles. particular, air for conditioners, given significant their role fuel- and demand) electricity for (in appliances energy-efficient for standards consumed, energy the of value market the already mentioned, such as action to move inefficient towards end-user prices for energy that reflect the at aimed directly policies require energy practices and technologies that are commonplace in the will region – often the policies that one and Iraq, for challenge generation) constitute just over 1% of Iraq’s overall needs in 2015 in needs overall Iraq’s of 1% over just constitute generation) Waterrequirements and and gas power (oil energyproduction sectoractivities tosupport but alsoto inefficient methods usedinagriculture andelsewhere. However, upstream, developments further period. to attributablewater solely shortagesfacingnot Iraqare projection the over fall to continue to expected rivers Euphrates and Tigris the from flow water with concern, a been long has water and supply water energy.Available for requirement overall an increasing in growing result A will prosperity. population future and Iraq’seconomy of determinants important both are oil and Water Water use
102 CO and use energy in increases and economy expanding an increase in road transport has an opposite effect. Substantially modifying the link between asignificant but benefits, pollution local brings also mix power the in generation private but freshwater supply is relatively scarce. To reduce excessive demand on freshwater in freshwater on demand excessive reduce scarce. To relatively is supply freshwater but production oil maintain to needed is injection water wherecountry, the of south the in However,water importantcouldstill becomean Iraq’sfactor in energy strategy, especially capacity in Iraq’s power sector will be strongly linked to water policy choices (see Box hydroelectric of development The Scenario. Central the in replace to expected often are they that plants power oil-fired the including options, technology other many to relative requirements water low particular, have in CCGTs, as expansion, generation of pace the match to expected not is generation power in cooling for requirements water in growth example, one takestrategy.To water its in factor determining a be to expected not are Middle East Russia Worl Chin Iraq 3.18 d a
0 ⊳
Carbon intensityinselectedcountriestheCentralScenario 0. 20 Tonnes ofCO .4 2 per thousanddollarsofGDP($2011,MER) 0. 60 World EnergyOutlook |SpecialReport .8 2 emissions is an important an is emissions 1. 01 (Figure .2 3.19) and so and 3.19) 2010 2035 3.2). 26/09/2012 12:05:23
079-106 Chapter 3_WeoIraq.indd 103 © OECD/IEA, 2012 21 fgrs r etmts * Fr icsin f h Dlyd ae se h cnldn section tothis see theconcluding Case, chapter. the Delayed of For discussion ** estimates. are figures 2011 * Chapter 3 | Scenario $100 around being GDP with size, current its significantly higher trajectory for GDP growth: Iraq’s Chapter economy (see growsproduction to well overoil five times in increase rapid the Case, High our In High Case Sources: Iraq Ministry ofWater Resources; IEA analysis. Note: Therequirement for oilandgas isfor the anticipated production intheCentral Scenario. Figure potable water, butthescale andtimingisuncertain. for demand growing the meet help to south, the in capacity,desalination mainly some in Gulf for energy purposes the south, early and ongoing investment is required to draw supplies of seawater from the Table 8% growth peryear over theprojection period asawhole. more rapid growth than that experienced by China in the last decade) and averages nearly
CO Electricity generation ntle lcrclcpct G)1 08 98 863 48 86 69 83 60 17 Installed electrical capacity (GW) Gas demand (bcm) rmr nrydmn Mo)4 1 6 4 8 4110 74 187 144 160 113 44 Oil demand(mb/d) energyPrimary demand(Mtoe) GDP (MER, $2011billion) 2 emissions 3.3 3.19 (Table ⊳ Iraq: fuellingfuture reconstruction and growth Total: 67billioncubicmetres (Mt)
⊳ 11 Iraq keydomesticenergyindicatorsbyscenario 3.3). Iraq experiences GDP growth of over 14% per year to 2020 (much 2020 to year per 14% over of growth GDP experiences Iraq 3.3).
Iraq waterrequirements,2015 Th 52227233112208 142 301 233 277 202 55 (TWh) (see Chapter 41 8
01 0023 0023 002035 2020 2035 2020 2035 2020 2011* 4 1 8 5 8 4 8 331 186 649 384 552 289 115 2 0 0 8 7 0 277 202 477 380 402 304 123 . 97 57 842 18 78 55 72 39 8.5 ...... 1.6 1.2 2.5 2.0 2.1 1.7 0.8 2 2). In the future, Iraq may also be expected to invest eta cnroHg aeDelayed Case** HighCase Central Scenario 0. 3 0. 4 billion higher in 2035 than in the Central the in than 2035 in higher billion Households Evaporaon/losse Marshland maintenanc Agriculture Power Oil andga Other industry gen s erao 2) feeds back into a into back feeds 2) n s e 26/09/2012 12:05:23 103
1 3 2 4 079-106 Chapter 3_WeoIraq.indd 104 © OECD/IEA, 2012 eeomn Pa 21-04 “vr h ps fw er, rq a dmntae the demonstrated has Iraq years, few past the “Over 2010-2014: Plan Development National the to foreword the in noted as government, Iraqi the by recognised is risk the of reality The 2011. in seen levels the from slowly only rise to were sector Iraq’senergy in investment if consequences stubborn the tests that It possibility developments. sector cautionary energy delay and obstacles contrary the at look we Case, Delayed the In Delayed Case 104 The maindomestic energy implications ofthe HighCase are: economy (Chapter for national institutions and governance and forthe development ofnon-oil sectors of the stability,macroeconomic for consequences undesirable and unintended have also can it in some can, circumstances, wealth offer generated substantial opportunities oil to improve social and economic of welfare; but flood a suggests countries resource-rich other of requiredhigher much energy-sectorlevelsof investment experienceachieved.The canbe whether importantly, and, prosperity national greater into revenue export in rise rapid The main uncertainty affecting the High Case is whether Iraq can succeed in turning a very not equate to a better outlook for renewables or CO does economy the in growth rapid more – changes policy additional of absence the Almost all of the increase in energy demand is met from fossil fuels, meaning that – in demand gap around 2015. the closing still Scenario,Central the in than quickly more any grid the from demand another in the near term, meaning that Iraq does not manage to fully meet electricity Additional generating capacity and increased electricity consumption largely offset one in theaverage efficiency ofthe power sector. more rapid conversion to CCGT plants around 2020, resulting in a faster improvement the in early installed is capacity GT More increase. Installed hugegeneration a electricity 2020, period to the during quadruples capacity renewables –aslightly higherreliance onoilthan intheCentral Scenario. other and hydro 1% and gas natural 38% oil, 61% is mix energy Iraq’s primary 2035, withPLDV fortransport, demand 1 ownershipper by increased higher pushed is consumption Oil in industry. gas consumption in is natural driven largely by power increase generation, but also The hydropower. by increased consumption from contribution additional small a with Natural gas and oil are called upon to meet almost all of the additional energy demand, in 2035. 2020 – more than one-quarter higher than the Central Scenario – and nearly 190 Mtoe 140 over is demand energy primary 2020. Total to period the in particularly More rapid economic growth driven by oil revenues sends energy demand even higher, higher thantheCentral Scenarioin2020andcloseto 20%higherin2035. 4). 000 people reaching almost 300, nearly three times today’sthreetimes nearly 300,reaching almost level. people By000 World EnergyOutlook |SpecialReport 2 emissions, which are around 25% period, but there is also is there but period, Outlook Mtoe in Mtoe 26/09/2012 12:05:23 079-106 Chapter 3_WeoIraq.indd 105 © OECD/IEA, 2012 cheaper andmore efficient generation. to moving in progress slower makes sector power the and quickly develop to fail sectors services and industrial lower,other sharply are revenues export as Scenario, Central the $3 nearly of loss a Iraq’s is economy on impact cumulative the Overall, Chapter 3 | progress inthe construction ofnew electricity capacity. InthisDelayed Case: slower growth in oil production (reaching 4 consistently in resulting lost, is Scenario Central the in investment cumulative the of half almost period, projection the throughout extended is assumption investment low the if a towards back to move trajectory consistentlater Butat a time. Case) Central High eventhe the (or with Scenario Iraq allowing lifted, progressively be could constraints and institutions. These framework legal Iraq’s reform and modernise to efforts government’s the of frustration as such factors, of combination a of because occur may investment in an economy that allows for progress and development” create to struggled has and investments,allocate budget, annual the manage to inability associated gas output)isconsiderably lower. therefore (and production oil though even flared volumes Scenario, total Central the whole, in as a than higher are period projection the Over flaring. gas of period The delay in putting in place new gas processing facilities also means a more prolonged that electricitydemand islower. Central the electrification achieved in one Scenario, is year later than despite the fact 3.8 and 2020 in in power generation for longer, which reduces their availability for export to 2.7 The slower development of gas infrastructure means that later liquid fuels play a larger the role reflects This 58%). with (compared appearance ofadditional gas supplyandprocessing infrastructure. 2035 in share 63% a and Scenario) Central the in (compared 67% 2020 consumption with in primary shareof 75% a with longer, for position predominant its retains Oil change. to slower is Iraq’smix energy 110 74 reaching slowly, more much grows demand energy being primary growth with trajectory, GDP Iraq’s around dampen revenues export oil Reduced Mtoe in2035. 2% lower per year on average than in the Central Scenario. As a result, total result, a As Scenario. Central the in averagethan on year per lower 2% Iraq: fuellingfuture reconstruction and growth mb/d in 2035. Delays to power generation projects mean that full that mean projects generation power to Delays 2035. in mb/d mb/d in 2020 and 5.3 (Ministry of Planning, 2010). Delay mb/d in 2035) and slower te n 00 and 2020 in Mtoe trillion relative torelative trillion mb/d 26/09/2012 12:05:23 105 1 3 2 4 079-106 Chapter 3_WeoIraq.indd 106 © OECD/IEA, 2012 26/09/2012 12:05:23 107 -128Chapter 4_WeoIraq.indd 107 © OECD/IEA, 2012 Chapter 4 | • • • • • • the levels ofspendingrequired. period to the 2016, we estimate that Iraq during will face a net financing budget: requirement of $27 billion to state meet the from financed be to expected is investment energysupply power in sector.new requirement The annual is highest in the current decade. Muchofthis $530 billion of over infrastructure to 2035. The bulkofthisinvestment is inupstream oil, followed by the investment cumulative need will Iraq for itsyouthful andgrowing population. in the hydrocarbons sector will generate only a small fraction of the jobs that Iraq needs employment Direct spending. ensure and revenues of management transparent and efficient and economy, the for and sector energy the for strategies long-term sound To realise this opportunity, Iraq will need strengthened institutions and human capacity, and diversification. recovery economic much-needed stimulate to used be can they a transformativeif Iraq to opportunity offer magnitude this of Revenues Scenario. Central the in 2035 to Iraq stands to gain almost $5 south –to Asia. gas supply to neighbouring countries, to European markets and – via LNG from the of sourcecost-competitive very a provide potentially can Iraq further,as exports 20 Gas exports from Iraq start around 2020inthe Central Scenario andapproach in themediumterm. period in the Central Scenario. Non-OPEC oil supply is also expected to grow, at least this in anticipated supply in growth the of three-quarters than more for account to more quickly. Growth inoutputfrom Iraq over thecurrent decade would beenough In the High Case, Iraq’s ambitions provide for near-term production to increase much that would reach almost $140perbarrel in2035real terms. probability,in all prices volatile and, more by higher characterised times, difficult very for set be would markets oil Iraq, from growth supply such Without Asia. in markets fast-growing to becomes the supplier key Iraq a and Arabia producer. Saudi after exporter anyother global second-largest than growth supply global to contribution Iraq5.6 adds What doesIraq’senergymeanforIraq,andtheworld? bcm by 2035.Theresources andmarket opportunitiesare there to expand Implications of Iraq’senergy development Implications ofIraq’senergydevelopment mb/d tomb/d bysupply oil global 2035theCentralin Scenario, alarger trillion in revenuesin trillion fromexports oil over the period Highlights Chapter 4 26/09/2012 12:15:10 107 107 -128Chapter 4_WeoIraq.indd 108 © OECD/IEA, 2012
Figure now, anditsGDPper capita would riseto alevel comparable withthat ofBrazil in2010. Iraq’s gross domestic product (GDP) in 2035 would be five times larger (in real terms) than 2035. by 18% around to 7% current the from grow to set is revenue OPEC total of share Iraq’sthat mean would trajectory This India. of bill import oil the than more and period same the over imports oil on spend to projected is China that amount the half is it 2035; diversification. On a cumulative basis, $5 and recovery economic much-needed support to potential the with Iraq, for opportunity 108 the reality ofwhichisevident intheeconomic performance ofother countries relying recognised threat to resource-rich countries, sometimes referred to as the a well- “resourceis curse”, There prices). international volatile potentially on dependence their from apart sector,oil atask that can actually be complicated by thescale oftheseoilrevenues (quite the beyond economy productive and self-sustaining a develop to needs Iraq population, the indicators for other major oil-exporting countries (Figure above well and 2011 in level of Kuwait around the is standards: 2035 figure Iraq in the for export revenue in GDP is projected toof remain above 50%. This share is very high by international the but period, projection the over decline to set is figure GDPin This years. of early the two-thirds to around equivalent wealth, national Iraq’s of share large very a constitute They attached. risks significant with comerevenues these realised, if even But, Note: GDPismeasured at market exchange rates (MER)inyear-2011 dollars. $300 $80 $5 almost export revenues over thecoming decades. IntheCentral Scenario, these revenues total in generate growth exceptional to set is Iraq in production oil in increase anticipated The The Central Scenario Energy inIraq’s economic andsocialdevelopment Billiondollars (2011,MER) 10 15 20 25 30 50 billion in2011to more than$200 0 0 0 0 0 0 ilo b 23 (Figure 2035 by billion 00 05 00 0522 0523 2035 2030 2025 2020 2015 2010 2005 2000 4.1 rlin n h pro t 23 (n er21 dlas, nraig rm around from increasing dollars), year-2011 (in 2035 to period the in trillion ⊳
Iraq oilandgasexportrevenuesintheCentralScenario .) Rvne o ti mgiue rae transformative a create magnitude this of Revenues 4.1). trillion is 10% of global revenues from oil trade to billion peryear inthe 2020sandclosinginon World EnergyOutlook |SpecialReport 0% 15% 30% 45% 60% 75% 90% 4.2). With a large and growing of GDP(rightaxis) Revenue asshare Oil exportrevenue Gas exportrevenue 26/09/2012 12:15:10
107 -128Chapter 4_WeoIraq.indd 109 © OECD/IEA, 2012 Chapter 4 | $530 is 2035 to period Central Scenario, thecumulative investment requirement for the energy sector inthe to rehabilitate existing energy infrastructure that isoften inapoorstate ofrepair. Inthe need simultaneous of time a at period, projection the of part early the concentratedin The investment required to raise production andgenerate theestimated revenues is Figure its oilwealth. of basis the on development national sustainable and successful achieve to is it if pitfalls these to alert keenlyremain to need will Iraq capacity isweak2007). (Humphreys, et al., institutional where those particularly resources, natural from derived wealth on heavily
in the energy sector depends to a large degree on the overall condition of public finances, diversification. On the present economic strategic approach, wider the adequacy and timing to of investment contributing of purpose supplementary important the serve would although the required strengthening of the business environment and the financial sector scenarios, built into our been not has policy in shift a Such more risk. toassume financial be to putinplace alegal andpolicyframework that could encourage theprivate sector would alternative an needs: investmentinfrastructure its meet could Iraq that way only the whether not treasury, is contractors. This by incurred Iraqi initially costs of the re-paymentsthrough or directly from financed be to expected is investment this of Much observed in2011. of ratio average the energy investment 2020, to export revenues After is year.lower – less than 10% – each which is below the level sector energy the into back to ploughed needs revenuesbe export Iraq’s of one-fifth than more to equivalent sum a 2020, to periodthe implicationthat,Theduring gas is electricity). (oil, energy and 2011 sector in per year, and can be compared with our estimate of just over $9 Spending duringthe years between 2016and2020isconsiderably higher, at $28 Share of oil export revenue in GDP (MER) 10% 20% 30% 40% 50% 60% 70% 80% 0%
4.2 02 Kazakhstan Implications of Iraq’senergy development ⊳
countries intheCentralScenario,2011and2035 Oil production and export revenue as a share of GDP in selected
Brazil Kuwait billion, more than $22 than more billion,
46
Iran Iraq 81 billion per year on average (Figure average on year per billion Russia Saudi Arabi 01 Oil producon(mb/d) a billion invested in Iraq’s 21 4
billion 2035 2011 4.3). 26/09/2012 12:15:10 109
1 3 2 4 107 -128Chapter 4_WeoIraq.indd 110 © OECD/IEA, 2012 forecast a deficit but ended the year in surplus, in part because the federal government federal the because part in surplus, in year the ended but deficit a forecast consistently has budget Iraq’s federal years, recent in institutional; is constraint Another increments. swiftly induce operators to hold back on their own investment or, at least, spend in smaller the mechanismfor therecovery ofcosts underthetechnical contracts, service thiscould of operation uninterrupted on doubt cast to as far so go to were balance fiscal the with problems If reduction. the of total brunt in the bearing fall spending 12% capital with a expenditure, Iraqi to led 2008, with compared revenue, in decline 31% a example, for 110 bill represents two-thirds of the state budget. wageassociated the and employment total of 40% aroundfor account state-owned enterprises and Public 1. salaries. sector public of consists which of bulk the expenditure, current cutting easily feed through into irregular capital asthere spending, are even more constraints on all too can in revenue Swings difficulties. create could fluctuations sharp to subject is that the Central Scenario, thoughanoilpricebelow thelevels assumedinthisscenarioorone of 2016 to $27 period the over requirement financing net a face will it then levels, at today’s expenditure government current keeps and sector) energy the in investment higher of capital spendingimpliedby theCentral Scenario (including allowance for the much level overall the meets Iraq If prices. in shifts abrupt by course off thrown be can growth have to allow for the potential volatility of internationalprices: oil-export driven economic investmentexportsfinance commoditytorelyheavilythatabove, noted economieson As Figure areas. large andgrowing publicsector, withahuge requirement for capital investment inother energywith competing substantial other with on claims government spending: hasIraq a
Billion dollars (2011) billion. Such a net financing requirement should be well within Iraq’s capabilities in capabilities Iraq’s within well be should requirement financing net a Such billion. 10 15 20 25 30 0 5 4.3 2012 ⊳ -2
015 in theCentralScenario Iraq annualaverageinvestmentinenergysupplyinfrastructure 2016 -2 02 02 2-0522-002031-2035 2026-2030 021-2025 World EnergyOutlook |SpecialReport Oil Gas Electricity 1 In 2009, In 26/09/2012 12:15:10
107 -128Chapter 4_WeoIraq.indd 111 © OECD/IEA, 2012 increase to over 11millionin2020and202035. age over the projection period. Based on our population assumptions, the labour force will working reaches population Iraqi a youthful as worsen even may and continue will ratio workforce of just under 8 Iraqi current a with compares This companies. service or operating privatesector in rest the and distribution, and processing refining, production, in engaged companies owned ih iet mlyet f rud 125 around of employment direct with Chapter generate anything like the employment opportunities that the country needs. As noted in Though thehydrocarbons sector willgenerate enormous income for Iraq, itcannot surge in revenue but also its efficient expenditure is an urgent and major challenge for Iraq. and rapid build-up in the administrative capacity required to manage not only the expected realised, beinvestment moving instead towards not the trajectory of the Delayed Case. The largewould Scenario Central the in investment energy of levels projected the sector, energy the in years coming the in repeated be to were pattern this If ministries. various the in implementation and preparation, management budget in weaknesses to due been Chapter 4 | levels education as employment seek will population improve working-ageand more women enter the job market.the of share greater a that likely is It 3. revenues, thanhadbeen assumed inbudget calculations. 2. A contributing factor has also been (with the exception of 2009) a higher oil price, and consequently higher has spent just 60-70% of the capital expenditure that it had planned for.
Figure pressing socialandeconomic needs willneed to befound elsewhere. construction, manufacturing and other service sectors, it is clear that the answer to Iraq’s (Figure each year. force In2035, total labour direct employment inthe oilandgas sectors may the reach upto 200 to additions net million a half for opportunities generate to has 2035 2020 2011 0481 4.4). While the oil sector will support a much larger number of jobs in related in jobs of number larger much a support will sector oil the While 4.4). 4.4 1, the oil and gas sectors currently employ no more than 2% of Iraq’sof gas2% sectorsmoreand than currentlyno oil employ the workforce,1, Implications of Iraq’senergy development ⊳
the CentralScenario Iraq labourforceandestimateddirectoilsectoremploymentin million. As the hydrocarbons sector is not labour-intensive, this 0, f hc aon 100 around which of 000, 21 62 3 On average, Iraq’saverage,economy On Million 0 0 wr i state- in work 000 2 This shortfall has employment Direct oilsector Labour force 000 26/09/2012 12:15:10 111
1 3 2 4 107 -128Chapter 4_WeoIraq.indd 112 © OECD/IEA, 2012 112 and how chooses it to promote ahigher level oflocal content (Box will happens this depend on how which effectively government at policy facilitates pace the development the of local but suppliers ground, lost this up make can Iraq emigration. internationalof peers alot during expertiseyears losing through sanctions, of conflict and supply industry, incommon withallpartsoftheeconomy, fell behind itsregional and and production as competitive alternatives oil are, in many cases, not available on the increase domestic market. Iraq’s to expects Iraq medium-term short- the to in inevitable which is imports on generation,reliance high electricity at speed the Given services. and At present, a large share of Iraq’s energy spending goes on imported machinery, equipment early efforts to ensure that sufficient skilled Iraq personnel are available. sophisticated policy environment to secure the necessarya more large-scale investment, requires as well also as products sophisticated more of manufacture the but plastics), and job creation can be achieved by moving further down the product chain (into intermediates production offers relatively little in the way of employment. Realising a larger potential for chemicals Moreover,basic players. regional well-established with markets in foothold a but it is not without risk: Iraq is a relatively late mover and,in some cases, is looking to gain 2020s, petrochemicals the development a in the industry of direction, notably with this in made is progress assume Central Scenario, we the In feedstock prices. competitive atand inputs energy of availability the given Iraq, for path a viable be could This diversification. of economic element one gas can provide and sectors oil industrial energy-intensive downstream and of activities development the strategy, economic overall an of part As growth ofthenon-oilsectors ofthe economy. make it possible to afford a very large public sector, risking the crowding-out of productive bewill required to safeguard against the dangerous luxury of believing that suchrevenues vigilance Constant sector. private nascent the for environment networks, supportive a of water element and telecommunication important one contribute modern therefore would They education. public and systems as transport such development, social and economic underpin to assets other develop can revenues these system, refining modern a and networks gas and electricity functioning in investment Alongside spending. public revenues, oil Iraq’s of use judicious through is business spending that currently goes into more expensive local diesel generation. Second from network thepublic iseliminated around 2015,releasing theshare ofhouseholdand supplies power in shortfall the Scenario, Central the electricity. In of particularly services, energy reliable modern, of provision the through is contribution important most and first How can the energy sector help create wider opportunities elsewhere in the economy? The wise strategic choice of priorities for priorities of choice strategic wise i.e. World EnergyOutlook |SpecialReport 4.1). 26/09/2012 12:15:10 107 -128Chapter 4_WeoIraq.indd 113 © OECD/IEA, 2012 Chapter 4 | 4. Box Fund that is intended to provide education and training opportunities in petroleum engineering and engineering in petroleum opportunities training and education operations to Iraqi nationals. provide Total payments to this fund are currently toaround $60 million per year. intended is that Fund Existing technical service contracts oblige contractors to support a Training, Technology and Scholarship riig tcncl n egneig education engineering and technical training, oil international an company. services processThe developingof with capacity require will investment in agreements partnership up set has Oil, of Ministry the of part is that company state-owned a Company, Drilling Iraq the example, for taken: being already are expand to steps operationsand field oil in experience long has Iraq longer-term objective of expanding into thewider Middle Eastern market. can companies Iraqi the with but itself Iraq within initially areas, shipping. these of many in moretake toon expect and freight and management, project rigs, labour, construction on spent is rest the systems; control and compressors pumps, as such equipment of consists fifth another aggregate; and cement as such materials, other to halfofinvestment spendinginthe oilandgas sectors consists ofsteel products and inputs that could increasingly besupplied from withinthecountry itself. Typically, up The energy investment anticipated in Iraq requires alarge number of components and GDP, anextra $4 reaching 55% by the end of the projection period,quickly, around 1% morewould be added torise Iraq’sto were share this If 2035. by 45% reaches it that such spending, the oilsector, we have assumedagradual increase inthelocal content ofinvestment in developments on primarily based is which growth, Iraq’s GDP of calculation our In building upindependent domestic suppliers and contractors. of means important an provide can enterprises) state-ownedfavour to moment the for tend (which policies procurement own directly, their projects public finance authorities Where implementation. project to barrier cost or obstacle an as acts it that capacity local of ahead far so running not contracting, local to spur genuine a as acts it that so care with designed be to needs requirement such Any plans. development sectors,theyconsideredcould be also conditions futureas in licensing field or rounds Iraq’sgas and in legislative oil requirement; but, a the circumstancesintroducedas in contentenergyin sector projects.countries, some haveIn kind measuresthis of been At present, there are no measures in place in Iraq that mandate a certain level of local oilandgasservice field equipment. or store manufacture, that businesses attract to help also could hydrocarbonssector the for zone free secure and specialised a Basrah near create announced to 2012 initiative September in the effectively, implemented If pipe. gas and oil produce will $280 contracts,worth business development. There are someencouraging signs.In2012, Iraq awarded two 4.1 ⊳
Implications of Iraq’senergy development Gaining billion innational outputin2035. local million, for the construction of new factories in the south that south the in factories new of construction the for million, benefits from Iraq’s 4 and supportive conditions for new for conditions supportive and energy investment boom 26/09/2012 12:15:10 113 1 3 2 4 107 -128Chapter 4_WeoIraq.indd 114 © OECD/IEA, 2012 114 foundationsstronger has sector sector.oil energy might The the of rest sectorthe in those oil of ahead run the in developments that Scenario) Central the in also thepossibility present is accentuates (which Case High the projections, full-scale our of part not Although Table year, more thanfour times higherthanourestimate of total energy investment in2011. between 2015and2020would need to be at average levels ofmore than$40 way the vastly increased capital budget: investment in the energy sector during the period and timely efficient an in manage to order in Iraq’s capacity in step-changeinstitutional a be to need would There costs. unit increase further could 2020 to period the in additions capacity of concentration the and investment for bill higher a be would economy.There the of sectors non-oil the of development the and management revenue with problems exacerbate could windfall huge this of scale the clear, but are impacts positive potential The section). next see case, this in assumption price oil lower slightly a (despite Scenario an additional $1.8 exportsgenerate $610 oil additional Case, an High the In Central Scenario. the of that to comparable level a to down comes GDP in revenue export oil of share the the mid-2020s, when oil production growth tapers off. By the end of the projection period, greater a export revenues rise to a level above 80% of GDP in 2015 and stay above 70% of GDP implies until also but Iraq, actually reducing economic diversification until the latter part to of the projection period. Oil growth GDP thus 2020s, rapid early the until sector hydrocarbons the in activity economic concentration of more brings Case High The Economic development intheHighandDelayedCases Notes: MER=market exchange rate; mb/d=millionbarrels perday; bcm=billioncubicmetres. Billion dollars (2011) Gas export (bcm) Gas production (bcm) Oil sector investment Oil export (mb/d) Oil export revenue i rdcin(bd 2.7 Oil production (mb/d) Gas sector investment Gas export revenue Power sector investment GDP (MER, $billion) 4.1 ⊳
projections forIraq Key energyexport,revenueandinvestmentindicatorsfromthe trillion over the projection period as a whole, compared with the Central 0122 0522 0522 2035 2020 2035 2020 2035 2020 2011 115 1.9 2 0 9 eta cnroHg aeDelayed Case HighCase Central Scenario 289 . 6.3 4.4 . 8.3 6.1 0223 0223 2012-2035 2012-2035 2012-2035 41 4 4 319 880 106 142 71 5 384 552 17 89 World EnergyOutlook |SpecialReport . . 2.7 7.9 7.1 9.2 billion in the period to 2020 and 2020 to period the in billion 31418 114 63 8 6 6 503 644 211 154 81 05405.3 4.0 10.5 649 37 8 331 186 0 billion each 3 3 178 288 103 35 17 3.8 49 7 26/09/2012 12:15:11 for higher output – in the form of existing contracts with skilled international companies – than might be achieved in other sectors (despite the various impediments, discussed 1 in Chapter 2, could hold back oil output growth). Compared with gas and electricity, operations in an export-oriented oil sector are less dependent on domestic policy and the 2 institutional environment, so long as reliable access to international markets is ensured. Rapid increases in oil output, with the associated growth in revenues, could even be the 3 occasion for holding back investment in other parts of the energy economy (as well as the economy as a whole) by appearing to lessen the urgency of upgrading inefficient 4 technologies or changing inefficient practices, such as the large-scale use of oil in power generation. If realised, the combination of higher oil production with a slower pace of change in other sectors would be a worrying development for Iraq, as the increasing dependency on a single commodity would be symptomatic of the onset of the “resource curse”.
In a Delayed Case, oil export revenue is almost $1.6 trillion lower over the projection period than in the Central Scenario, despite higher international prices, resulting from tighter oil markets. Annual spending on energy investment rises compared with 2011 but remains well below the levels required for the Central Scenario, reaching average levels of $13 billion over the projection period as a whole. Overall, the power sector absorbs a slightly higher share of investment spending than in the Central Scenario, which creates the potential for stress on public finances as the balance in spending shifts away from the high revenue-generating oil sector. The share of oil export revenue in GDP, though, remains stubbornly high at around 60% (this indicator falls to a lower level by 2035 in both the Central Scenario and the High Case).
Iraq’s impact on international oil markets The international market context is a crucial consideration in assessing the prospects for Iraq’s oil output. On the demand side, the speed and location of global oil consumption growth in the Central Scenario implies for Iraq a continued shift in orientation towards markets in the Asia-Pacific region, to which around 50% of Iraq’s oil exports go at present. While recognising any exporter’s interest in diversity of markets, Iraq’s position as the major provider of additional barrels of oil to the world market means that it will naturally be drawn to the high-growth markets, notably China and India, where growth in global oil consumption will be concentrated.5 In the same period, overall demand for oil in European and North American markets declines by around 1% per year and the demand for imported oil in North America falls much faster, because of growth in indigenous production.
5. Chinese�hinese oil companies are active in Iraq’s upstream:� �CNPC������������������������������������������������������� is a partner in the consortium development of the Rumaila field and operator of Ahdab; Petrochina is operator of Halfaya and CNOOC of the Missan Group. These fields account for more than 2 mb/d of Iraq’s anticipated production in 2020 in the Central Scenario. India’s Reliance has two licences (Sarta and Rovi) in the KRG area.
Chapter 4 | Implications of Iraq’s energy development 115 107 -128Chapter 4_WeoIraq.indd 116 © OECD/IEA, 2012 than that ofBrazil andisdoublethat ofCanada. barrels per day (mb/d)in2020and almost 12mb/d2035. 4 around reaches and decade, of this part latter the from starting substantially, rises countries OPEC from NGLs and crude of production additional for requirement the and natural gas liquids (NGLs) from oil the OPEC countries. of crude Compared with a baseline of 2010, production in growth substantial requiring off, tail to starts supply oil OPEC non- 2020, However, towards demand. global incremental of part significant a meet to sufficient is supply non-OPEC in growthprojected theyears, fewnext Kazakhstan.the For extent, lesser a to and, Brazil from output in increases anticipated and America North in 116 year. basethe in production low of becauselatter’s amplified the contributionLibya,Emirates Arab and United producersother The 7. projected higher with production are2011 in than 2035 in Venezuela, Kuwait, the used to produce shale gas. 6. Light tight oil is produced from shale, or other very low permeability rocks, with technologies similar to those 2011. in did they than oil more produce to projected are world the in countries ten only which (Figure 2035 to period the over growth supply oil global in rolelargest the plays distance, some by Iraq, Scenario, Central the in projections the of basis the On output. oil global pillarsof main the of one becometosetIraq 2035,is to period the Over The Central Scenario oil, tight light especially oil, unconventional of rise the by driven production, non-OPEC in rise the is term near the in Iraq to importance of trend major the side, supply the On 2011, suchasthe lossofsupplyfrom Libya andthe highlevel ofnon-OPEC outages. temporarymarketexigenciesof in impact excludetothe chart this foryear base the as used is 2010 Note: Figure
mb/d 12 15 0 3 6 9 7
The growth inIraq’s outputof5.6 4.5 052020 2015 ⊳
Growth inOPECandnon-OPECsupplytheCentralScenario
052030 2025 mb/d over thisperiod ismore than2 World EnergyOutlook |SpecialReport 2035
4.6), at the end of end the at 4.6), Processing gains supply growth Total non-OPEC growth Total OPECsupply mb/d higher
million
26/09/2012 12:15:11
6
107 -128Chapter 4_WeoIraq.indd 117 © OECD/IEA, 2012 Chapter 4 | andweoil anticipate that thiswill continue to be the case(Box exporter, behind Saudi Arabia. Virtually all of the oil exported at present from Iraq is crude oil second-largestglobal the become to 2030 around overtakeRussia to set is Iraq result, a As growth. export oil global to contributor largest the Iraq make also projections These 6.3 at period projection the finishing 2025, growthwhich ismore gradual. Iraq’s exports riseto 4.4 after 2020s, early the into continuing and 2015 startinggrowth around of steepestperiod the with period, projection the during substantially increase to exports oil Iraq’s allows Offsetting projected internal demandin Iraq from projected supplyinthe Central Scenario Figure
Figure sector) aslarger volumes ofnatural gas become available. for power generation, but this temporary increase slows (and is then reversed in the power primarily market, domestic the on absorbed is production oil incremental of share larger United States Saudi Arabi
mb/d Kazakhstan 10 2 4 6 8 0 00 05 00 0522 0523 2035 2030 2025 2020 2015 2010 2005 2000 Canada Brazil Iraq 4.6 4.7 a
0 Implications of Iraq’senergy development ⊳ ⊳
Iraq oilbalanceintheCentralScenario Central Scenario Major contributionstoglobaloilsupplygrowth2035inthe 1
23456 mb/d (Figure mb/d mb/d in2020and5.2
4.7). In the period to 2015, a 2015, to period the In 4.7). 4.2). Consumpon Producon Net exports mb/d in mb/d 26/09/2012 12:15:11 117
1 3 2 4 107 -128Chapter 4_WeoIraq.indd 118 © OECD/IEA, 2012 118 Box spending. judgementbetween market a and make strategic to considerations needs to Iraq determine priorities but exclusive, for infrastructure mutually means no by are options facilities to handle an additional crude export stream by tanker from the south. These direction, towards Asia. This would suggest giving a priority to establishing dedicated our However, Mediterranean. other the market highest in be the found that projections suggest Iraqto is value for the to routes export overland of) expansion (or to export routes, avoiding over-reliance on the is toStraits diversify of Hormuz, this would point to the early addition objective overriding the If required. facilities surface Thestrategy adopted by the government will have on thedeliveryimpact an and integrity andconsistency ofthe distinct streams. advantageous to avoid blendingtheheavy oil,sellingitseparately, andmaintaining the stream by blending it, but – as crude the share heavier of heavier oil the increases – manage it may become to more optimal be may it moment, the For production. oil its of quality the in changes these strategy marketing its in anticipate to need will Iraq Nonetheless, inorder to ensure that itcaptures themaximum value from itsexports, specifications. of range a with crudes handle can refineries modern large, the where and quickly most growing is demand where Asia, in markets to go will crude export as to cause difficulties for buyers of Iraqi crude since we anticipate that much of Iraq’s great so not variation is expectedquality YamamaThelighter). deeper is layer(which the quantities from limitedmore together with 20s), high to mid the gravityin API an volumes from theshallower Mishriflayer, which generally contains heavier crude(with larger in come to set are supplies new so depleted, gradually is formation 35°API. this as But around crude density anintermediate containing name) same with the the of be confused field to not Zubair, (the formation geological a from been has thus far production Most crudes. heavier willbe of crudes share larger of a variety including Iraq, greater in that a produced implies profile production our time, Over into theexport stream. blended being oil fuel heavy and crudes heavier of result a contractual as figures, the than heavier being oil delivered the of specification the forcompensate to discounts However,north. the to counterpart)pipeline bysouthern offer its to has often than it lighter,API, contractualactually 36° a is with (which Blend Kirkuk and south the from tanker by 34°) of gravity [API] BasrahInstitute Petroleum Americancontractual a (with crudes, Light different two exports Iraq present, At values. export maximising in country’s abilityto combine crudesinto aconsistent blendisanimportant element The crudeoilproduced by Iraq variesdensity,and inquality meaningthat the 4.2 ⊳
Crude qualityandmarketingoptions World EnergyOutlook |SpecialReport 26/09/2012 12:15:11 107 -128Chapter 4_WeoIraq.indd 119 © OECD/IEA, 2012 reaching 101 remaining 2020, around these levels in to 2035. As a result of lower prices, barrel oil consumption is slightly higher, per $115 around is price international the Case, High the In a lower trajectory for the international oil price than that assumed in the Central Scenario. it. As a result, there is a shift in the global balance between supply and demand, producing Scenario) is indeed accommodated by adjustments by other OPEC producers, but not all of have modelled, part of the additional increase in Iraq’s output (compared withwe the that Central Case High the In 2010. in level the below well 2020 to up production reduce to need would OPEC of rest the Scenario Central the global in anticipated level of the at production share its keep to OPEC for order in extent, this to share market incremental the capture to were Iraq If supply. non-OPEC in growth anticipated significant is there which during period a also is This Scenario. Central the in 2020 to increase anticipated incrementalsupply,global oil largerof share totalmuch three-quarters the than moreof are more than 7 than more are and 2020), in Scenario Central the in reached level the (approximately 2015 in already 4 above to rise exports projected 2020, in mb/d 9 than more to rises production Chapter 4 | (Figure 2020 to period the in particularly Scenario, Central the in than higher substantially is exports and production oil Iraqi of level projected the Case, High the In Iraq’s oilmarket impactintheHighandDelayedCases would represent amajorcontribution from Iraq to the stability ofglobaloilmarkets. support its own reconstruction and development. Realising the projections in this scenario the linesoftheCentral Scenarioare inlinewithIraq’s own needs for export revenue to along Iraq from production in growth market for global the of needs the that confidence Despiteinevitablethe uncertainty over future market some with said conditions, be it can in 2035. $1.3 over to 2020 after steadily rising period, projection the throughout year per Central $1 the above well in remain OPEC of projections rest the by our earned revenues estimated Scenario, in foreshadowed as grow exports Iraq’s producing other If in many countries). funds wealth and reserves financial large of build-up the to of conflict and stagnation (a period during which the absence of Iraqi capacity contributed decade is buttressed by the need for export revenue to finance its recovery after decades incremental currentthe the over supply OPECincremental Iraq’sto increase. claim the of quarter 2020, a over After 2020. to just for accounting Iraq period with countries, OPEC among broadly the more shared is production during NGLs and crude of supply OPEC in growth required the of share lion’s the meet can Iraq Scenario, Central the In Implications of Iraq’senergy development mb/d by theendof projection period. mb/d in 2020. Production growth of this magnitude would represent a represent would magnitude this of growth Production 2020. in mb/d
4.8). As 4.8). trillion trillion mb/d 26/09/2012 12:15:11 119 1 3 2 4 © OECD/IEA, 2012 terms). There is also likely to be a significant increase in price volatility. volatility. price in increase significant a be to likely also is There terms). nominal in barrel per $240 or 2035 in terms real in barrel per $140 (almost 2035 by higher 11% and 2020 in Scenario Central in the in than increase higher 3% is This significant price. a oil international the producing period, projection the over considerably markets oil tighten to act would Case Delayed the in projected levels the at Iraq from Supply Scenario. 5.3 only reaches rise, to continues it though be production, oil would Iraq’s – Case, Delayed a Scenario In waters. Central troubled our for in heading projected Iraq from supply in growth the without – which markets, oil for outlook different very a present Case Delayed the in projections The markets. global to confidence new bring would capacity spare of reserve reasonable a hold to aim Iraq’s met, been have needs pressing most country’s the term longer the in if but, priority Iraqi early an be to unlikely is capacity production spare creating Deliberately (Spotlight). reducing needs market output, short-term to to respond flexibility some actual retaining but exported volumes the above and over capacity production spare develop to opting extent some by to impacts market manage to seek Mexico). could of Gulf authorities Iraqi the the in Alternatively, moratorium disaster the Horizon Deepwater example, the for following (as, drilling prospects deepwater on upstream in change a in or growth consumption the constrain oil to policies announced implement to failing governments coming years, the over growth economic expected than faster from result could circumstances These increase. would oil Iraqi incremental for requirement the – anticipate we than lower producers in other from supply growth global in that growth or – extent project we the than faster is To use oil account. global into taken be must uncertainties market Global Figure 120 mb/d 10 12 0 2 4 6 8 00 05 00 0522 0523 2035 2030 2025 2020 2015 2010 2005 2000
4.8
⊳
Iraq oil balance in the High Case High the in balance oil Iraq
mb/d b mb/d y 2035, 3 2035, y
mb/d s mb/d hort of the level expected in the Central Central the in expected level the of hort World Energy Outlook | Special Report Consumpon Consumpon Producon exports Net
107 -128Chapter 4_WeoIraq.indd 121 © OECD/IEA, 2012 Chapter 4 | 8. Prices at these levels would have an impact on global oil demand in the Delayed Case, Delayed the 94 reaches which in demand oil global on impact an have would levels these at Prices production. 2020 from onwards, as period the global the market startsin to evident rely on increasingly a smaller becomes number of marketsproducers on for additional strain The 2035). by 700 additional (an countries OPEC from primarily come to anticipated be would this and output, raise to producers other on reliance additional alternative fuels. The shortfall in Iraq’s supply, compared with the Central Scenario, means distances), faster penetration of more efficient driving technologies and reduced switching via away fromexample oil (for to conservation of mix a is consumers from response The (2.4 2035 by cases, and not yet tested in practice. some clear, in not are used not but built capacity contractors for compensate to modalities However,the production. curtail to authorities the allowing provisions include Government KurdistanRegional the with
production capacity in Iraq costs, on average, $10 average, on costs, Iraq in capacity production though it to medium-term, short- oil the of day per a barrel opportunity. that in estimate important We an be ultimately could proposition viable a economy, be the to of unlikely sectors is other this in needs pressing Iraq’s given own spare uncertain: its is to create capacity deliberately decision Iraqi any of timing The own. its of any developsbeforecapacityspare it of levels global on impact indirect havean well could Iraq producers, other by supply displaces Iraq’sproduction in rise a that extentTo the investment. this with associated stream revenue no reliable is –there definition by – since justify to difficult be can capacity production spare but consumers, Avoiding as well of supply. as the interest producers in oil to demonstrably is disruptions destruction demand of consequent and impact spikes price the against insurance some countries, importing by held stocks oil the like and, developmentsmarket unforeseen or sudden internationalabuffer that an good Spare public provides production is againstcapacity but Iraq hasset thestrategic aimalsoto develop adegree offlexibility. present, the major share of global spare oil production capacity rests with Saudi Arabia, interest. At national its serves best needs market additional to responding that judges Iraq when and as deployed be to ready capacity, production oil spare some retaining means This output. adjusting by needs market to respond to potential its on also but produce, to capacity its on only not depends markets oil global to contribution Iraq’s Scenario isprojected to bearound $200 $15-$22.5 between be would 1.5 upstreaminvestmentbuild the required tothat means This The technical service contracts concluded by the federal authorities and the production-sharing contracts
Implications of Iraq’senergy development mb/d lower), primarily as a result of reduced growth in the transport sector.transport the in growthreduced of result a as primarily lower), mb/d Why investinspareoilproductioncapacity?
mb/d by 2020 (0.5 2020 by mb/d
billion. For comparison, oil export revenue in the Centralthe revenueexport in oil comparison,For billion. SPOTLIGHT
mb/d lower than the Central Scenario) and 97 and CentralScenario) the than lower mb/d
billion in2020.
000-$15
thousand barrels per day [kb/d] day per barrels thousand 000 (in year-2011 dollars).year-2011 (in 000
mb/d of spare capacityspare of mb/d 8
mb/d 27/09/2012 14:19:30 121
1 3 2 4 107 -128Chapter 4_WeoIraq.indd 122 © OECD/IEA, 2012 potential gas export. gas resources willtherefore bethe key to determining theprospects for, andextent of, Chapter in discussed As 2035. the to over period Iraq within from demand anticipated of 70% around only cover to enough is associated gas of production cumulative Scenario,Central the In export.gas for allow to in itself sufficient be not will production oil rising with along produced be will that gas gasquickly be will flaring Moreover,reduced. associated accordingthe projections, our to to which gas will be used in the domestic market for electricity and industrial uses and how extent the uncertainty over significant still is clear-cut. There less are perspectives gas for levels ofproduction andexport volumes can be counted uponto grow fast, the Whereas in the oil sector domestic consumption remains small compared to anticipated the domestic market, freeing upthemore valuable andmore easily exported commodity. Chapter in noted As gas. associated Iraq’s projected production in 2035 consists of roughly equal shares of associated and non- 122 in gas flaring. practice projecting that total output will be about 4.5 20 to close today is flaring) (including productionIraq’s gasflared. total currently are gas that of volumes the of context the in seen be should production gas marketable in increase ten-fold The 9. rises to Scenario the Central in 90 almost Iraq in production gas Marketed examined. cases and Natural gas plays anincreasingly important role inIraq’s energy balance inallthescenarios Iraq’s impactoninternational gas markets Figure
matching Iraq’s ten-fold increase in marketable gas output (albeit from a very low base). low very a from (albeit output marketablegasIraq’s matchingin ten-foldincrease (Figure period this over growth of increase is one of the fastest in the world and only five countries achieve faster absolute OPEC supply(excl.Iraq) Non-OPEC supply 4.9 billion cubic metres (bcm) in 2035, a full 80 full a 2035, in (bcm) metres cubic billion Oil demand ⊳ Oil pric
compared withtheCentralScenario Key oilmarketindicatorsin2035theDelayedCase, e -3 %0 4.10). Among major gas producers, none comes close to close comes none producers, gas major Among 4.10). %3 3, gas provides an important substitute for oil use in use oil for substitute important an provides gas 3, , h dvlpet f rqs non-associated Iraq’s of development the 2, times larger than today, but with a significant reduction %6 World EnergyOutlook |SpecialReport bcm higher than in 2011. This rateThis 2011. in than higher bcm %9 %1 bcm, so we are inare we so bcm, 2% 26/09/2012 12:15:11
9
107 -128Chapter 4_WeoIraq.indd 123 © OECD/IEA, 2012 producer in the region at 700 Chapter 4 | 7.7 was 2010 in production LPG global producers: LPG leading oil. Iraq’s projected output of 440 – as well as condensate and other natural gas liquids – are included in the volumes and revenue calculations for mixture(a propaneLPG of 11. butane)and product a is gas of both processing refining.oil and LPGof Exports in Iraq’s gas exports. commensurateincreasea for allow could this period, five-yearagreed the beyond continue to were Iran from longer-termgeneration).clear.powerforThe not perspectives used are be imports otherwise If would that oil five years, whichwould boost gas availability until domestic supplies become available (andfree upsomeofthe power generation.in Volumesuse for of primarily up toIran, 25 from million pipeline cubic metres new per a day havevia Iraqbeen centralagreed to in principle imports forgas a for period place of in plans are There 10. associated gas production. There is also the question of how decisions regarding gas export degree on the trajectory targeted for oil production)significant and ona the incentivesto in placedepends fortherefore non- gas, associated of importance the of because (which, evolvebestmight gas supply-demandbalance the strategichow clear on requiresa vision needs to be supplied first – and the more attractive returns available on export markets. This Iraq will manage the trade-off between the low value of gas on the domestic market – which is how clarified be sector, to the question investorspotential key a in makersand policy For in thenational surplus a with balance available decade, for export from 2020. of this part of gas the latter use until by generation increased power in accompanied is production gas rising Scenario, Central the In Figure
220 in 2011, Iraq becomes anet exporter in2016and, by 2035,isexpected to export around 33 around of imports LPG requiring position sector.petrochemicalscurrent its From the within increasingly, also and, heating and cooking for fuel a as region the in and Iraq in used widely is which (LPG), gas petroleum liquefied of producer substantial a become (Figure period 17 reach to 2030 after again rising before 2020s, the Turkmenistan United State kb/d. Australia Russia Chin 4.10 Iraq 11 a s
Implications of Iraq’senergy development 05
⊳ .1. h got i gs rcsig aaiy lo en ta Ia will Iraq that means also capacity processing gas in growth The 4.11).
Central Scenario Growth innaturalgasproductionselectedcountriesthe kb/d (21 kb/d kb/d (15 million tonnes [Mt] per year) in 2035 would make it one of the world’s 0
Mt). 10 10 Gas export is stable around 10-15 around stable is export Gas 01 mb/d (240 mb/d bcm by the end of the projection the of end the by bcm 50 Mt), with Saudi Arabia the largest the Arabia Saudi with Mt), 20 02 bcm during bcm bcm kb/d 50 26/09/2012 12:15:12 123
1 3 2 4 107 -128Chapter 4_WeoIraq.indd 124 © OECD/IEA, 2012 124 facility, with a capacity of 4 million tonnes (Mt) of LNG per year (around 5.5 export southern a proposed have Mitsubishi and Company,Shell Gas Basrah the for plan investment the of part As Basrah. around area the in development industrial consuming how quickly the currently flared volumes are captured and processed and decisions on gas- production, gas associated and oil for outlook the to tied closely are perspectives overall country, the of south the the important. In Iraqgeography is gasproduction within The of Figure by-pipe”. “gas-by-wire”,exporting distances, short relatively over countries: neighbouring to export for electricity generate to surplus uncertainty that will pushthemback.Afurtherpossibilityis Iraq might usepartofany gas continued while Iraq, from export gas for prospects the expand and forward bring could Regional the alreadyvital oil questions, exploitation, successful Kurdistan these for on GovernmentClarity (KRG). and authorities federal the between differences the and sector bewill taken, anaspect ofthevexed issue ofoverall governance ofthehydrocarbons
Syria, the authorities in Anbar province Anbar located) in Syria, is authorities (where field the the thatargued should gas export: responding to the possibility that gas from Akkas might be earmarked for supply to well the potential for friction between the aims of providing gas for domestic supply or for illustrates field Akkas the over debate The Korea’s KOGAS. by led consortium a to round licensing national third the in awarded was which of development the Syria, with border the near field, Akkas the is export of gas potentialfor source main Iraq,the westof the In for export to nearby Kuwait. consortium a led by Kuwait Energy, production the of some allocated whichbe from could non-associatedsouthern gasSiba project, awarded thirdthein national licensing round to $4 than more to cost estimated provisionally facilities, export and liquefaction in investment up-front large a require would project export gas a Such
bcm 10 20 40 60 80 0 0
2000 4.11
⊳ 2005
Iraq gasbalanceintheCentralScenario
2010
0522 0523 2035 2030 2025 2020 2015 gas-fired electricity, can be competitive with “gas- with competitive be electricity, can gas-fired i.e. World EnergyOutlook |SpecialReport ilo. hr i as the also is There billion. bcm per year). Producon Net export Consumpon s
26/09/2012 12:15:12
107 -128Chapter 4_WeoIraq.indd 125 © OECD/IEA, 2012 available oninternational markets. that to gas the of value the raise tounlikely be case, any in would, and end-users by paid electricity of price the increase to decision challenging politically less no involvesa gas of consumption local for paid price Moreover,the export.raising gas over shadow similar a insist that they alone have constitutional authority for international energy (who trade), has authorities cast federal the and KRG the between differences the to due area, KRG the from export oil for channels federal of use intermittent only meant has that dispute the the local market,for or clarity on the conditionsgas for natural of gas export. For the moment,pricing however,the in change a 2011), in commissioned gas was plant the natural LPG (an liquids on monetising a perspective requires fields the develop to investment providesfor forwhich powerlocalsold generationgas Mobilising be to prices. low very at currentlyis Mor producing).contracttechnicalare developed Thesea being under service Khor (and term medium the in potential region’s gas the of share significant a KRG, represent the by awarded The been have uncertainty. contracts which toconsiderable for fields, Chemchemal and subject Mor Khor though are export for timing and prospects The gas projects. in and thepossibility investors international from high interest strong generating is undoubtedly is export of north in the production gas for potential The also associated gas from southern fields. Iraq is seen as the most likely initial source of gas, with a second phase potentially involving an optimistic scenario), figures that are broadly linein with our own projections. Northern Chapter 4 | the in consumption Gas Kuwaitgas. of deficit Jordan, looming (Turkey,a faces also imports Arabia Saudi upon and Syria) and reliant currently are neighbours Iraq’s of Four needs. domestic their meet to gas of imports on dependent neighbours its of many with If andwhen Iraq doesstart to export its gas, itwillhave awide range ofavailable markets, Potential gas export markets androutes European Union, suggesting trade Commission volumes in 2030 European at 15 the for report A (Mott Union. European the to further, and, Europe increasing need for imported gas, aswell asaconduit to markets intherest ofsoutheast an with market, export proximate large, a provides Turkey area. KRG the in particularly country, the of north the in associated is gas Iraq projectionproduction period in over the Although the resources in the west may be of comparable size, the main potential for non- after 2020. only up picking production gas see Iraq of part this inthe for projections produced Our Desert. gas Western any uncommitted for of demand source the over mark question a be exported. For themoment, unrest Syria in hasclosedthedebate aboutexport, leaving wasto 2011) in KOGAS with produced of supply prioritise gas Anbar’sto power plants, signed leaving scope anyfor surplus to deal the in reflected (as resultindustrial to promote The development. and generation power for market local the on used primarily be MacDonald, 2010) identified Iraq as a very promising source of gas supply to the to supply gas of source promising a very as Iraq identified 2010) MacDonald, Implications of Iraq’senergy development bcm (in a base case) and 30 bcm (in 26/09/2012 12:15:12 125 1 3 2 4 107 -128Chapter 4_WeoIraq.indd 126 © OECD/IEA, 2012 126 for retrieval duringperiods ofpeakdemand inthe winter, isnolonger inuse. gas storage: a facility built in the 1980s in the Kirkuk region for LPG, which held a surplus during summer months 12. This storage could be either in the importing or the exporting country. At present, Iraq has no underground price assumedfor these markets in2020. the below well be would Greece) or Bulgaria Turkeywith of border western the as here (assumedEurope southeastmarkets markets, regionalin including the of anyexportedto markets, compared with Europe. The analysis shows that the delivered cost of pipeline gas terms of destination and access to the higher prices assumed to be available in Asia-Pacific in flexibility offer though, does, option this capacity; liquefaction in required investment large the Asia-Pacific of markets,to because LNG primarily of that costis supplied highest (Figure competitive very be can it that suggests 2020 in markets international and regional possible of variety a to Iraq from gas delivering of cost the of analysis Our with anentry to the fast-growing markets inthe Asia-Pacific region. demand rises and indigenous production falls. To the south, LNG export would provide Iraq 200 almost require to projected are which markets, gas an offers routes into southeast pipeline AzerbaijanEurope these provides of an opening extension for from possible Iraq the to and become Iraq, volumesa supplier northern to from European tie-ins export for opportunity accommodate to Turkey across capacity require to transportation expected gas new of likelihood are The gas. imported of markets volumes additional substantial European other and Turkey Scenario, Central the In would these countries to require investment insufficient export storage to match the variations indemand. reliable output), gas vary to discretion less much has volumes are sourced inwhole orinpartfrom associated gas (inwhichcase the operator export the Where months. summer the in demand higher experiencing – Iraq including Middle Eastern markets is the seasonality of electricity and gas use, with many countries– to export on constraint potential further A region. the within trade) trade electricity (including energy of development the hamper to continue to likely is risk political of legacy transport Iraqi gas to Kuwait, but it has been inoperative since Iraq’s invasion in 1990. This to mid-1980s the in completedwas Kuwait and Rumaila between link a point: in case a is pipeline export gas existing only Iraq’s conflict. or politics by interrupted the been have in past flows energy Many potential. among the its trade below energy far remains and East Middle the in place of countries links these of few relatively though, are, There interconnections. cross-border short only require cases, many in would, export that consideration the by in 70% than more by rise the periodto 2035.There are, therefore, to robust drivers for projected regional trade, underpinned still is whole a as region the in use gas mature, decades and,althoughthisannualgrowth isexpected to slow asgas markets become more three last the over year per 8% than more at increasing been has whole a as East Middle World EnergyOutlook |SpecialReport bcm in additional gas imports as imports gas additional in bcm 12 4.12). The 4.12). 26/09/2012 12:15:12 107 -128Chapter 4_WeoIraq.indd 127 © OECD/IEA, 2012 growth of modern refining capacity (to absorb otherwise surplus heavy fuel oil). If Iraq If oil). fuel heavy surplus otherwise absorb (to capacity refining modern of growth the of account takes and industry) and generation power (in demand gas of sources new of growth the match availability gas that co-ordination, requiring policy of challenges the Iraq’sof quality the of sector highlights more This than other policies. any institutions and indicatora more reliable practice be mayin – eventually also export for and use domestic performance in the coming years, progress in developing the gas sector – both as a fuel for Iraq’sa of indicator energy key as output oil on focused be rightly will attention Although Chapter 4 | with projected exports reaching 7 themid-2020s, after only emerges asurplus but demand, gas domestic (lower) with pace keep to able initially is production case, this In export. and investment gas are deemed unattractive innon-associated or too risky because of prolonged uncertainty over the conditions opportunities for while production, oil lower by back held is gas 37 25 reaches and 2019, in Scenario, Central the in than slightly earlier also starts Gas export GDP growth). higher (from demand domestic in increase projected the than larger is gas) non-associated and associated from (both production in In the HighCase, the volume ofgas available for export ispushedhigherasthe increase Variations inthe HighCase andtheDelayed Case thermal units. British = million MBtu for Scenario. Central facilities the from of are 2020 cost for assumptions price the Import liquefaction. LNG of consists case, any in cost, the of bulk The markets. Chinese and Indian transportation the of to cost the of average an is market Asia-Pacific the to LNG shipping of cost The royalties. taxes or include not do costs Production gas.associated be to assumed is which plant, LNG possible a into feeding production southern of exception the with fields, gas non-associated be to assumed is gas the of liquids. source gas The significantly, vary design. detailed couldprojects their costsfor individual gas on Supply depending natural be low because of output to substantial by accompanied generally is are assumed Iraq in gas processing costs and Dry production dollars. year-2011 in indicative, are costs All Notes: Figure
South toAsia-Pacific(LNG bcm by the end of the projection period. By contrast, in the Delayed Case, associated Case, Delayed the in contrast, By period. projection the of end the by bcm North toSEEurope West toSEEurope 4.12 South toKuwait North toTurkey West toEgyp Implications of Iraq’senergy development ⊳
export, 2020 Indicative deliveredsupplycostsandpricesforIraqgas bcm by 2035(Figure t ) 036
4.13). Dollars 91 per MBtu 21 bcm by the mid-2020s and mid-2020s the by bcm (2011) 5 Import pric and transit Transportaon Producon e 26/09/2012 12:15:12 127
1 3 2 4 107 -128Chapter 4_WeoIraq.indd 128 © OECD/IEA, 2012 128 Figure as awhole. capacity isthere to take onother challenges facing theIraqi energy sector andthe economy the country away from high direct dependence on oil but also a signal that the institutional moving in only not substantial step a be sector, will gas domestic this viable a developing demand oil domestic increased in succeed Iraq’sIf does and for Iraq exports oil position). fiscal also for implications (with in result to likely whole, a as sector energy the across does not succeed in managing these challenges, there will be a range of lost opportunities
bcm 10 12 20 40 60 80 0 0 0020 0021 0022 002035 2030 2025 2020 2015 2010 2005 2000 0 4.13 ⊳
Delayed Case Natural gasproductionandexportintheHighCase World EnergyOutlook |SpecialReport Delayed Case: High Case Exports Producon Exports Producon : 26/09/2012 12:15:12
129-130 Annex A_WeoIraq.indd 129 © OECD/IEA, 2012 Mass Gas Energy Monetary Annex A | Emissions Units This annex provides general information onunitsand general conversion factors. Units andconversion factors TJ Gt Gt GJ $ trillion $ billion kt kg tcm bcm mcm TWh GWh MWh kWh Mt MJ MBtu Mtoe toe boe gCO ilo 1USdollarx10 $ million kg Gt ppm gCO CO CO 2 2 /kWh /km 2 2 -eq -eq terajoule (1joulex10 gigatonnes (1tonne x10 gigajoule (1joule x10 1 USdollarx10 1 USdollarx10 kilotonnes (1tonne x10 kilogramme (1000 trillion cubicmetres billion cubicmetres million cubicmetres terawatt-hour gigawatt-hour megawatt-hour kilowatt-hour million tonnes (1tonne x10 megajoule (1joule x10 million Britishthermalunits million tonnes ofoilequivalent tonne ofoilequivalent barrels ofoilequivalent grammes ofcarbon dioxide per kilowatt-hour grammes ofcarbon dioxide per kilometre greenhouse gases) 100-year globalwarming potentials for different gigatonnes ofcarbon-dioxide equivalent (using parts permillion(by volume) kilogrammes ofcarbon-dioxide equivalent Units andconversionfactors 12 9 6 kg =1tonne) 12 9 ) 6 ) ) 3 9 ) ) 6 ) Annex A
26/09/2012 12:18:49 129 129-130 Annex A_WeoIraq.indd 130 © OECD/IEA, 2012 130 General conversion factors for energy Power Oil Convert to: From Mtoe MBtu GWh TJ multiply by: GW MW kW W mb/d kb/d b/d TW 4.1868 x10 1.0551 x10 3.6 TJ 1 -3 4 gigawatt (1 Watt x10 megawatt (1 Watt x10 kilowatt (1 Watt x10 watt (1joule persecond) million barrels perday thousand barrels per day barrels perday terawatt (1 Watt x10 2.931 x10 .789782.388x10 947.8 0.2778 11 630 GWh 1 -4 World EnergyOutlook |SpecialReport 3.968 x10 3 12 9 ) ) 6 ) MBtu 3 412 ) 1 7 2.52 x10 8.6 x10 Mtoe 1 -5 -8 -5 26/09/2012 12:18:49 131-133 Annex B_WeoIraq.indd 131 © OECD/IEA, 2012 Annex B | States. City, United Oklahoma Corporation, Pennwell 23, Issue 109, Volume Journal, Gas and Oil (2011b),“A− Veteran Revisits Iraq’s Resource Oil Listsand Implications Magnitude”, the of Gas Journal, Volume 109, Issue49,Pennwell Corporation, OklahomaCity, United States. O&GJ (Oil and Gas Journal) (2011a), “Worldwide Look at Reserves and Production”, Oil and Paper, SPE126427-MS, Mumbai. for a Sector in Main Pay South Rumaila Oil Field, Society ofPetroleum Engineers Conference (2010), Al-Shamma D. and Al-JawadW., M. Mohammed, BP (2012), BPStatistical Review of World Energy2012, BP, London. States. Iraq, Society of Petroleum Engineers Conference Paper, SPE 3437-MS, New Orleans, United Al-Naqib, F., et al. (1971), Water Drive Performance of the Fractured Kirkuk Field of Northern Chapter 2:Iraqoilandgasresources andsupplypotential World Bank, Washington, DC. (2012), Bank World (2012), Unit Ordnances Factsheet inIraq,United Nations, New Analysis York. and Information Inter-Agency UN − (2010),IraqElectricity Masterplan, Parsons Brinckerhoff, Baghdad. Parsons Brinckerhoff, Baghdad. (2009b), − Brinckerhoff, Erbil,Iraq. (2009a), Brinckerhoff Parsons Planning ofIraq, Baghdad. 2010-2014, Ministry of Plan, Development Ministry ofPlanningIraq (2010), National Statistics Oraganization/Kurdistan Region Statistics Organization/United Nations, Baghdad. IKN(Iraq Knowledge Network) (2012), vallares_analyst_presentation_sep2011.pdf, accessedSeptember 2012. Genel Presentation, Energy, Investor Champion, a Regional of Genel Energy (2011), Creation Amman, Jordan. Arab(2010),Electricity Unionof Chapter 1:Iraqtoday: energyandtheeconomy www.genelenergy.com/admin/resimler/detay_resim/basin_dokumanlar/genel- Final Report on the Survey of Private Generation in the Baghdad Governorate Baghdad the in Generation Private of Survey the on Report Final References Doing Business 2012: Doing Business in a More Transparent World, Transparent More a in Business Doing 2012: Business Doing Statistical Bulletin 2010, Issue 19, Arab Unionof Electricity, atrln o te R Eetiiy Sector , Parsons Electricity KRG the for Masterplan Iraq Knowledge Network Survey 2011, IraqCentral Survey Network Knowledge Iraq Reservoir Flow Simulation Study Simulation Flow Reservoir adie ad Unexploded and Landmines References Annex B 26/09/2012 12:19:09 131 , 131-133 Annex B_WeoIraq.indd 132 © OECD/IEA, 2012 132 United Kingdom. Mott MacDonald (2010), University Press, New York. Humphreys, M., J. Sachs and J. Stiglitz (eds.) (2007), Chapter 4:Implications ofIraq’s energydevelopment − (2010),IraqElectricity Masterplan, Parsons Brinckerhoff, Baghdad. Parsons Brinckerhoff, Baghdad. (2009b), − Brinckerhoff, Erbil,Iraq. (2009a), Brinckerhoff Parsons Baghdad. of Planning, Iraq Ministry ofPlanning(2010), Iraq National Development Plan, 2010-2014, Iraq Ministry Statistics Organization, Baghdad. Iraq Central Statistics Organization (2012), Statistics Oraganization/Kurdistan Region Statistics Organization/United Nations, Baghdad. IKN(Iraq Knowledge Network) (2012), Chapter 3:Iraq:fuellingfuturereconstruction andgrowth 2012, OPEC, Vienna. (2012), Countries) Exporting Petroleum of (Organization OPEC Final Report on the Survey of Private Generation in the Baghdad Governorate Baghdad the in Generation Private of Survey the on Report Final Supplying the EU Natural Gas Market, Mott MacDonald, Croydon, atrln o te R Eetiiy Sector , Parsons Electricity KRG the for Masterplan Iraq Knowledge Network Survey 2011, IraqCentral Survey Network Knowledge Iraq Annual Abstract of Statistics 2010-2011, Central World EnergyOutlook |SpecialReport Escaping the Resource Curse, Columbia Annual Statistical Bulletin Statistical Annual 26/09/2012 12:19:09 , 131-133 Annex B_WeoIraq.indd 133 © OECD/IEA, 2012 26/09/2012 12:19:09 134-140_pages de fin_WeoIraq.indd 134 OUTLOOK WORLD ENERGY RELEASE: 12NOVEMBER 2012 2012 26/09/2012 12:19:25 WORLD WORLD
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