In March, it looked as if Iraq’s energy prospects were finally looking up…
In February, the country produced 3.6 million barrels of crude oil per day — the most in 35 years — leading its government to claim that it would reach 4 million barrels per day by the end of the year.
Unfortunately, that wasn’t exactly what happened…
Since then, production has fallen 7% to about 2.5 million barrels per day, and we’re only expecting to see a slight jump this month to 2.7 million barrels per day.
The recent declines shattered the government’s previous goal of 4 million barrels per day, bringing it down to about 3.5 million barrels per day.
So what happened?
To put it simply, the country is embroiled in a variety of disputes.
The latest spat is between Iraq’s State Oil Marketing Organization (SOMO), which claims exclusive rights to oil exports, and the autonomous Northern Kurdish Region, which has been slowly trying to export its own oil without consent from SOMO.
You see, the Kurdistan Regional Government has been shipping its crude via truck to Turkey. Recently, however, exports have started to flow out of Kurdistan via pipeline, which will significantly boost its revenues.
Things really hit the fan last Friday when a tanker full of Kurdish oil began making its way to the U.S. Gulf Coast. Apparently, there was no buyer for the oil, and a quick condemnation by the U.S. State Department led to the tanker making a sudden U-turn.
If the U.S. had accepted the import from the tanker, we could’ve lost out on oil from Iraq (buying this oil could put the U.S. in hot water with Baghdad), which right now amounts to roughly 500,000 barrels per day…
Of course, I can understand why Iraq’s central government wants total control of oil revenue: its 140 billion barrels of proven reserves accounts for roughly 95% of the economy… At least, it will if the country can ramp up exports.
Since 2012, Iraq has been the second-largest producer of oil in OPEC behind Saudi Arabia.
But with this most recent battle between Kurdistan and the Iraq federal government, not to mention the escalating terrorist violence against pipelines, the future of OPEC oil is looking more and more bleak.
Until next time,