Iraq has set a 2006 yearend oil production target of 3 million b/d, but it will have to become much more stable politically to do so, the country's former oil minister said Nov. 8 in Washington, DC.
"We are optimistic that after next year's election, in which everyone participates, there will be no question of the government's legitimacy and we will be able to complete the oil field maintenance we have planned," said Thamar Ghadban, who currently is a member of Iraq's parliament.
That maintenance will involve hundreds of well workovers in both northern and southern Iraq, where vandals streamed into the oil fields to remove and sell equipment following the US-led invasion in 2003, he indicated.
But it also will be part of a larger effort that also includes building a natural gas pipeline from the south to the north to help generate electricity, he said during an appearance at the Center for Strategic and International Studies.
Iraq currently has 2.5 million b/d of oil production capacity and 2 million b/d of actual production "dependent on the integrity of its export pipelines," Ghadban said. But insurgents, who committed 264 acts of sabotage in the country during 2004, frequently attack pipelines and other oil facilities, he added.
The new national government also will need to reach accords with regional authorities such as the Kurds, who have negotiated production deals with some small outside producers in northeastern Iraq, he observed.
Such regional arrangements probably will need to be turned over the central government to Baghdad, Ghadban said. "When it comes to higher issues—exports, international agreements—these are best handled on a national level," he said.
Best revenue source
Iraqis generally recognize that oil production represents their best immediate source of revenue and probably would support fuller reactivation of the Iraq National Oil Co., according to Ghadban.
"I am optimistic that during the next year, we will solve the security issue, resolve questions about our petroleum laws and be read to negotiate production sharing agreements with large oil companies," he said.
Ghadban said that INOC's role probably would be limited to exploration and production, and establish two other companies to handle oil product refining and marketing and natural gas processing and distribution. "We would like to separate decision-making and day-to-day operations," he explained.
"Within the oil ministry's top echelons and among leading politicians, there are no objections to production-sharing contracts with clear-cut arrangements. This has worked in other producing countries and could work in Iraq," he maintained.
Asked about contracts with Russia and China, Ghadban replied, "I don't want to enter into their legality, since they were signed when Saddam Hussein was in power. But they were negotiated under completely different economic conditions. There at least has to be a review."
He said that Iraq's existing fields could provide 4.5 million b/d of production. "They are all in regions that have produced. They are close to roads and pipelines. They also have multiple reservoirs and prolific production. But it would require about $25 billion to develop them," Ghadban said.
"There is a growing awareness that we would not be able to get that money from the central treasury, but will need foreign partners," he added.
He estimated that it would take about 6 years to fully exploit Iraq's existing oil fields. "Some could deliver new production within a year under the right conditions," he said.
Despite its having produced oil since 1903 and selling it to foreign customers since 1934, Ghadban said Iraq still has significant exploration potential near its border with Syria and in the northeastern section controlled by the Kurds. But he suggested that the most promising region lies between the Tigris and Euphrates rivers.
"I believe common sense and wisdom will have to prevail in Iraq. The people want to improve their living conditions, and the only immediate source of revenue is the oil industry," he said.
War with Iran during the 1980s and sanctions imposed by the United Nations following the Gulf War in the early 1990s reduced Iraq's oil production to 900,000 b/d from 2.8 million b/d, he pointed out.
"So much needs to be done. Iraq has missed so many opportunities already. For its own sake, and for the world's sake, it can't miss any more," Ghadban said.