Dubai — Iraq could become the world's fourth largest oil producer by 2030 -- if it can secure adequate water for well injection, attract sufficient investment and maintain safety and political stability, the International Energy Agency said Thursday.
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Iraqi oil output, which averaged 4.54 million b/d in March, is expected to rise to nearly 6 million b/d over the next 10 years, contingent on those factors, according to a report released by the IEA.
That would allow Iraq to surpass Canada in the global crude producer rankings and would be a remarkable surge for a country that has been blessed with immense oil reserves but despoiled by the efforts of the Islamic State group and years of conflict.
The growth rate would also be the third largest increment of new global supply in the next 10 years, after the US and Brazil, the IEA said.
"If achieved, [Iraqi] production in 2030 would represent around 6% of global oil output, up from 5% now and less than 3% in 2010," the IEA said in its Iraq Energy Outlook.
Still, that is a downward revision from the IEA's last review of Iraq's energy prospects, in 2012, when it had forecast production of 7.5 million b/d by 2030, due to reductions in the plateau targets for many of the country's major fields and greater competition for capital.
Security is paramount to growing Iraq's output, but from a technical standpoint, securing ample water supply will prove vital.
Most of Iraq's southern fields in Basrah, its largest producing province, are operated by international oil companies under technical service contracts that require the government to provide water to maintain well pressure.
To expand production, Iraq will need to source around 3 million b/d of water to meet reservoir requirements, the IEA estimated.
"Progress on provision of adequate water for oil recovery is essential," the report said. "Without it, production rates could struggle to climb much beyond their current levels."
At the moment, Iraq gets about 70% of its water from neighboring countries, and changing environmental conditions means domestic sources continue to deplete.
"Increasing competition from other users for water resources, ongoing drought and reduced river flows from upstream dam building means that operators can no longer rely on river water for field injection purposes," the IEA said.
The Common Seawater Supply Project (CSSP) is expected to come on stream by 2023, and will process seawater from the Persian Gulf to be used by oil fields in Iraq, but as an interim measure, IOCs will need alternative sources, such as the creation of water treatment facilities.
The big four fields in Iraq ? Rumaila, West Qurna, Zubair and Majnoon ? are expected to account for around 70% of the production increases in Iraq.
WASTEFUL GAS FLARING
Meanwhile, gas production, net of flaring, venting and reinjection, is set to reach 50 billion cu m/year by 2030, compared with 15 billion cu m/year currently. That is a major downward revision from the IEA's 2012 forecast, when it projected gas production would rise above 80 billion cu m/year by 2030, as the agency cited Iraq's slow progress in capturing rising associated gas volumes and a lack of development of non-associated gas fields.
The IEA recommended Iraq should focus its efforts on gas-flaring reductions and clarify the ownership of flared gas and ways it can be monetized.
About 17 billion cu m/year of associated gas is flared in Iraq, the IEA estimated, nearly double the volume of gas that is brought to market. "Flaring is particularly wasteful in a country that remains short of electricity," the IEA said, projecting that the flared gas could fuel about 4.5 GW of gas-fired power generation ? enough to power 3 million homes.
Electricity demand is set to double by 2030, according to the IEA, driven by a growing population, which is set to rise by 15 million by 2030.
Cutting network losses and capturing more gas to supply the local market will be crucial if the country wants to decrease its reliance on imports. A concerted effort to boost the use of renewables in the country?s energy mix will also free up gas for use in power generation.
In order to meet short-term power demands, the IEA said Iraq should carry out required maintenance, enforce tariff regulations on neighborhood generators and carry out efficiency upgrades for power plants.
In the medium term, the IEA emphasized the need for continued maintenance and upgrade work on the grid, increased tariffs, development of renewable energy sources and encouraging investment in the sector.
--Miriam Malek, email@example.com