Iraq has officially increased the size of its proved crude oil reserves by 24%, from 115 billion barrels to 143.1 billion barrels. The increase moves the country up from third place in the league tables, passing Iran with 137 billion barrels, but still lagging far behind Saudi Arabia’s 265 billion barrels.
The announcement is particularly good news for big oil companies. BP plc (NYSE: BP), Exxon Mobil Corp. (NYSE: XOM), Royal Dutch Shell PLC (NYSE: RDS.A), Eni SpA (NYSE: E), and Total SA (NYSE: TOT) all have signed contracts to develop Iraqi fields.
Iraq plans to boost production from about 2.5 million b/d currently to as much as 12 million b/d by 2017. The announcement pushed crude prices back below $81/barrel early this morning, but prices have moved back above $81.50 as traders figured out that the Iraqi announcement won’t change anything for at least the next year.
The largest field in Iraq is West Qurna, which has now been estimated to hold 43 billion barrels, making it the second-largest field in the world behind Saudi Arabia’s massive Ghawar field. Exxon holds the first-round development rights for West Qurna, and rights to a second-round have gone to a consortium led by Russia’s Lukoil.
Rights to develop the 17-billion barrel Rumaila field are shared by China National Petroleum Corp. and BP. Shell owns the rights to the Majnoon field, which is now estimated to hold 11 billion barrels.
The Iraqi oil minister noted that 71% of the country’s total reserves are located in southern Iraq, mainly around the city of Basra. About 20% are located in the north, around the city of Kirkuk. The rest center around Baghdad.
The new estimates do not include reserves in the semi-autonomous region of Kurdistan, where regional officials have estimated their reserves at about 40 billion barrels.
Whether or not Iraq can produce from these reserves at the rate it has targeted remains to be seen. Certainly drilling in the country’s sands is a lot easier than drilling under a mile of water and thousands more feet of sea floor or in the unholy conditions that prevail in the frozen Arctic. The big issue in Iraq, of course, is security. Will the government of Iraq be able to guarantee that drillers will not have to face gunfire in order to bring out the oil?
As of this writing, Paul Ausick did not own a position in any of the stocks named here.
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