Storm clouds threaten Iraq’s striking oil revival

from the Financial Times..

July 8, 2013

By Guy Chazan

When it comes to the world’s rising oil powers, none has risen quite as quickly – and with such profound implications for global crude markets – as Iraq.

Ravaged by decades of war and sanctions, Iraq’s oil industry is making a remarkable recovery. Production has rebounded strongly thanks to big investments by western majors in the country’s long-neglected southern oilfields.

“We see Iraq as one of the countries that will be making the most significant contributions to world oil supply over the next 5-10 years,” says Jessica Brewer, Middle East research analyst at energy consultancy Wood Mackenzie.

By any measure, the comeback is striking. Iraq’s oil production has increased by 1m barrels a day since 2002, the year before the US invasion, to about 3m b/d. Last year it hit a crucial milestone when it overtook Iran to become Opec’s second-biggest producer after Saudi Arabia.


But storm clouds could threaten Iraq’s revival. Bottlenecks are undermining continued production growth: weak government institutions mean contracts for crucial infrastructure projects are not being awarded quickly enough. A deficit of skilled workers is dogging the industry.

“There are a lot of issues that are out of the western oil companies’ hands, such as Iraq’s infrastructure constraints,” Ms Brewer says. “There is a shortage of pipeline, storage and pumping station capacity.”…

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