Oil production is the most important component of Iraqs economy. The country has proven reserves of 115 billion barrels, but it’s estimated that about 90 percent of the country is unexplored due to the military turmoil’s that marked Iraq’s recent history.
If these estimates are true, the undiscovered reserves could increase production capacity with 100 billion barrels. The cost of producing oil is also amongst the lowest. Finding cost is less than one dollar per barrel, while finding and development is estimated at $1.50 to $2.25 per barrel.
Oil production was deeply affected by the 2003 US-led invasion. Pre-invasion production was 3.5 million barrels a day and is currently around 2.5 million. Iraq’s Ministry of Oil expected to reach 6 million barrels a day by 2012. However, the country’s capacity of boosting production depends on three factors.
Boosting Oil Production depends on 3 factors
#1
First, Iraq must set up a viable business model for international investments switching from its long experimented state company model. The country may not have money to pay for international contractors without giving them a share of the profits. The Iraq Hydrocarbon Law comes into play.
#2
Second, Iraq is a member of OPEC, which imposes certain restrictions on production.
#3
Third, the country must increase security and deter any risks of terrorist attacks.
In May 2007, Iraqi Council proposed a legislation known as the Iraq oil law or hydrocarbon law which would authorize PSAs (production share agreements) with foreign companies, guaranteeing them a share of profits. The remaining revenue would be distributed by the central government on a per capita basis.
Furthermore, Iraqi provinces would receive autonomy in awarding exploration and production deals. Under this legislation, the state-run National Oil Company would only control 17 out of Iraq’s 80 oil fields, leaving operational control over two thirds of the fields in the hands of foreign investors. However, part of the profits would go into Iraq’s tax revenue.
After the $3 billion deal signed with China in 2008, Iraq started looking for other international partnerships, including Russia and Iran. The Russian company LUKoil is in talks for renewing its $3.4 billion deal with Iraq from the Saddam Hussein period. Gazprom Neft is another company interested in developing oil and gas plants in Iraq.
Iran plans to build a gas pipeline project passing through Iraq. The country aims to import about 200 thousand barrels of oil a day from Iraq for its Khuzestan refinery.
All these international partnerships should help Iraq reach the goal of more than doubling oil production by 2015. However, recent reports claim that these plans are somewhat unrealistic and that if everything goes well, Iraq may be able to increase production to approximately 4.1 million barrels per day by 2015 which leaves the range of estimates from 4.1 to 6 million barrels per day.
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This article may be reprinted online or offline as long
as this box remains and hyperlinked online. Written
by Darren Chabluk for http://DrDinar.com/blog
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Whats with “Iran” comming in?
Hi Darren , Thanks this information i have no doubt that Iraq would be back on the world market pretty soon in my opinion this country have too much potential to be kept down take care ,
Sam
Darren,
In my opinion I don’t think that any of this has any bearing of the price of the Dinar. But that is strictly my opinion …. I think that once we are out of the Country that the Dinar will have more value. I have heard in the past that the World Bank will Peg or revalue the dinar. But as I have said in the past I think that it needs to happen sooner than later so more stability comes into the region. I have also heard that it up Iraq’s Prime Minister Nuri al-Maliki to set the value of of the Dinar. I do not know if this is true or not.
Thanks
David
I think Iraq is going to replace Kuwait as #2 in oil production and leave them smoking in the dust and soon! I also think reval is just around the corner and chapter 7 will be lifted soon.
There is a movie called the ‘Butterfly Effect’, which stresses the concept of how every event big or small has a ripple effect on all other things in the universe one way or another.
Iraq can be the number one oil producer in the world, but it will not have an effect on the dinar, not until all of the sanctions are lifted and I really don’t see that happening anytime soon, but when it does happens it want be iraq oil production gone wild, it will the dinars gone wild.
I have been following this for over 20 years now and have invested in the Iraq Dinar because, like the Japnaness Yen and the German Mark after WWII, the Kuwait Dinar after Desert Storm all have and will have an increase in value. At one point the Kuwait Dinar fell in value from $3.79 US dollars per 1 Kuwait Dinar to less that 50 cents US. It took less than 9 years for the Kuwait Dinar to be back to $3.79 per US dollar.
What it will take is for stability, drop of sanctions, the World Bank, the IMF, International Monetary Fund and the ICC, the International Chamber of Commerce, Paris, France to come to an agreement that there are enought reasons that Iraq needs thier on International Monetary System and that they can back it with not only OIL but a soild inferstructure that can and will support the Country of Iraq. That is ny belief,
You are so RIGHT Jay, thats why I’ve said that it will take a few more years before the value of the dinar will rise.