On the oil front, Iraq has advanced a lot (unlike Iran)

2

October 9, 2016 by AK

As mentioned in this comment thread on White Sun of the Desert, the question, “Was the Iraq war about oil?” deserves to be answered in the negative if “about oil” means “about unprecedentedly lucrative contracts for Exxon and Halliburton.”

It’s not the only sensible interpretation, however: “about oil” can also mean “turning Iraq into a reliable, Western-friendly producer that would keep the market supplied in the event of sanctions or wars elsewhere.” In this case, the answer could be affirmative, but ultimately depends on how much the planners of the war knew about Iraqi oil reserves and infrastructure in 2003.

What can be said with a high degree of certainty is that Iraq is now OPEC’s #2 producer of crude oil, pumping at about 4.5 mmbpd. The exact number depends on whether one relies on Iraq’s own estimates or secondary sources, but its second place within OPEC is not in dispute. Thanks to the post-war service contracts with various oil majors (including BP and Lukoil), Iraq is producing roughly 2 mmbpd more than it did during the pre-war peak in 2000, and (almost) 1 mmbpd above its previous record, set in 1979, before the war with Iran.

One could argue that 4.5 mmbpd is not that much compared with Iraq’s ambitious, occasionally sky-high targets suggested at various times by various officials, such as 12 mmbpd of capacity by 2016 (2009) and 9-10 mmbpd production by 2020 (2012). The Iraqi officials underestimated the challenges of rolling out the infrastructure necessary to support a massive surge in crude output, to say nothing of security issues (which so far have mostly affected the Kurdish north – a promising oil province dwarfed, however, by the southern fields). Nor did they anticipate the plunge in the oil price in 2014, which almost drained dry the government’s share of crude.

Relative to Iraq’s updated targets, 7 mmbpd in 2021 and 5.5-6.0 mmbpd in 2020, the current output looks like a temporary plateau on a growth path. Looking back at 2011, the first year of growth, almost 2 mmbpd has been added since, which makes adding a further 1.5 mmbpd by 2020 look like a realistic prospect. However, the additional infrastructure – water supply, electricity generation, gathering pipelines – might be too expensive to build if the oil price shows no signs of major growth.

But then again, even if its output stops increasing, in the near future Iraq will probably retain its place behind Russia, Saudi Arabia and the US, sharing the fourth position with Canada, slightly ahead of Iran and China. Before the Islamic revolution, Iran held the second place in OPEC and the fourth in the world: in 1978, its production had already come off the peak of 6.6 mmbpd but remained above 5 mmbpd, only to crush by almost 4 mmbpd in the glorious revolutionary year of 1980. Iran has never managed to attain the pre-revolutionary peaks.


2 comments »

  1. Tim Newman says:

    I’d say the Iraq War was all about oil, but Saudi Arabia’s, not Iraq’s. I put a comment up at Streetwise Professor about this some time ago:

    One or two of the American leadership actually said it at the time, that the US had a concern that – following 9/11 – as soon as it had its back turned and its forces tied up somewhere else, Saddam Hussein would once again start threatening the Saudi oilfields. A lot of people liked to say that Saddam Hussein was no threat, but this was largely due to the American army sat in Saudi Arabia ready to meet him head-on should he try anything. But the presence of the American army in Saudi was a huge problem for the Saudis, as it was deeply unpopular, not least with Osama bin Laden whose main issue with the US was that their infidel army was on holy Saudi soil (all the rest of his bluster about Israel, etc. came way later). While Saddam was still in power, the American army had to stay in Saudi; and the Americans didn’t want to have to factor in Saddam Hussein marching on Saudi if and when their forces are engaged elsewhere. So, in my opinion, the Americans decided to grasp this nettle at a time of their own choosing rather than get dragged in at some later date when they are already stretched elsewhere. Of course, this all got drowned out in the WMD bullshit and all the other arguments as the US sought to justify regime change through legal channels, the UN, and international coalitions. But it has long been my opinion that the world effectively offloaded the responsibility of keeping the Gulf oil flowing to the US, and the US simply acted on that mandate.

    Two things happened post-Saddam that support this theory: the American army decamped in short order to Qatar, thus solving the problem of having infidel soldiers on holy Saudi soil. And the Kuwaitis launched an enormous programme to rebuild their oilfield infrastructure which had been left to deteriorate following the Gulf War through fear of another invasion. It was participating in this programme that saw me move to Kuwait in 2003-2004.

    I think a lot of world leaders privately acknowledged the US’ role in keeping the Gulf oil flowing and keeping Saddam Hussein out of Kuwait and Saudi Arabia, which is why the protests at the Iraq War never really amounted to anything concrete (especially from China). The Russians and French objected mainly because they stood to lose a lot of money from unpaid debts and future contracts should Saddam Hussein be ousted, but I think even they quietly acknowledged that the US is the one keeping the world open for business in terms of the oil flowing from the Gulf.

    • AK says:

      Thanks for reminding me – I definitely did read that thread when it appeared, including your comment, but somehow I had forgotten about it completely when I was writing this post. To sum up, I would say the war was meant to keep the oil flowing from Saudi Arabia and to add more from Iraq in case Iran might have to be taken out. It has worked out OK, for the most part. ISIS has never gotten far enough into the south to seize the oilfields that really matter.

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