Iraq's oil production falls short of goals
Despite years of rebuilding, petroleum production continues to fall short of targets, due to insurgency vandalism, poor field management, and corruption.
from the May 7, 2007 edition
Page 3 of 3
Meanwhile, the future of Iraq's draft oil law appears in doubt. Iraqi Kurds and Sunnis have expressed deep misgivings about some legislation details, each group for its own reasons.
The proposed bill would divide up earnings from existing and any new oil fields according to regional population. That's meant to mollify the Sunnis, since Iraq's known petroleum reserves are concentrated in the Kurdish north and Shiite-dominated south.
But Kurdish leaders say they don't think the draft law cedes enough oil field development autonomy to the regions. Sunni legislators have indicated that they believe Iraq's continued violence makes consideration of an oil law premature – and that the proposed bill might open the door too wide to foreign oil companies.
The White House has long held that an effective oil law is a precondition for Iraqi national reconciliation. The US administration has thus made passage of the bill one of the benchmarks of success it wants the Iraqi government to meet.
"All parties have to give a little bit" if an oil law is to be enacted anytime soon, says Mr. Verrastro of CSIS.
In the long run, Iraq's oil resources remain a great regional prize.
Iraq has 115 billion barrels of proven oil reserves, according to the US Department of Energy. Only Saudi Arabia and Canada have more.
The Iraqi government projects that production will rise to 3.1 million barrels a day by 2008. Given current problems, that's unrealistic, say US experts. Further investment of $5 billion to $10 billion will be necessary to get back to prewar oil pumping levels, estimates Jaffe. It may take $15 billion to $25 billion beyond that to increase production further.
High oil prices have propped up Iraqi government export earnings. And a flood of Iraqi oil is unlikely to affect those prices anytime soon, although "an increase in the level of Iraqi oil exports could be a major variable in international energy markets in the coming years," according to Jaffe's report.
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