Iraq: We’re back in the game

In the world of oil reserve forecasting, Iraq is hunky, handsome, and — to its dissatisfaction — often overlooked. Today, it sought to rectify this negligence with the announcement of a whopping 24 percent increase in its estimated reserves. With a poke in the eye to a traditional rival, Iraq’s oil minister said the country had overtaken Iran as the world’s fourth-largest petrostate, with 143 billion barrels of oil, or more than half of Saudi Arabia’s mother lode.

Hussain al Shahristani appears to be targeting two audiences with his announcement, write Bloomberg’s Kadhim Ajrash and Nayla Razzouk: cash-rich foreign oil companies and, more importantly, the Organization of Petroleum Exporting Countries (OPEC), which at some point will reassign Iraq a production quota.

Bluntly speaking, Shahristani was giving the following notice to OPEC: We are big, really big, and can shake up global oil prices if left to our own devices. Meaning that the house of petulance and jealousy that is OPEC is going to have to move back and create a significant space for Iraq, which has ambitions of producing 12 million barrels of oil a day, and might get halfway there. (Currently, Iraq produces about 2.4 million barrels of oil a day.)

Not everyone is impressed. Reuters, for example, queried a number of nonplussed industry analysts. Bassan Fattouh, at the Oxford Institute for Energy Studies, noted that OPEC determines quotas based on actual production, not reserves. “So I’m a bit surprised by the statement,” Fattouh told Reuters. “I expect OPEC to continue having a wait-and-see approach and deal with this when Iraqi output and exports actually start increasing.” Andy Sommer, of the Swiss trading firm EGL, agreed. “I do not see Iraq getting any OPEC quota for the time being until production reaches something like 4 million barrels per day, which is similar to Iran’s production. … Everyone knows Iraq needs every penny it earns from oil to rebuild the country.”

Phil Flynn, an analyst with PFG Best, is impressed, but for different reasons, he wrote in his daily column today. “Oh well,” he said, “another setback for peak oil theorists.”