Telegraph PO exposure from Ambrose Evans-Pritchard

[JavaScriptDonkey]

Will Iraq's Energy Boom postpone Peak Oil Again?

[AnOriginalIdea]

Will Iraq's Energy Boom postpone Peak Oil Again?

AGAIN!!!

This must stop!!! Good God man, the next thing you know, we'll have another peak oil, followed by a peak plateau, who knows HOW long this nonsense can continue!!

[kenneal - lagger]

He's hedged his bets a bit later in the article:-

As a signed-up member of the cheap peak oil club – not quite the same as peak oil – I am watching this with great interests.

As the IEA says, this will require $530 billion of new investment. "The obstacles are formidable: political, logistical, legal, regulatory, financial, lack of security and insufficient skilled labour," it said.

Good luck to the Iraqis. Let us hope that they – with the help of BP, Shell, Exxon, et al – can pull it off.

Yes! Good luck! They'll need it.

He says that the Iraqis will have reached 8mb/day by 2035. That's in 23 years time. At a depletion rate of 6% that is two halvings of present production so, at about 85mb/day now, that will be about 21 mb/day. So the 8 from Iraq is going to make up for 64 mb/day loss in worldwide production.

My figures might be a bit out but not 64 - 8 = 56mb/day!

[adam2]

To significantly increase Iraqs oil production will require a great deal of investment, and possibly imported expertise.

It appears unlikely that anyone will risk a lot of capital until peace and stability breaks out, and looks lasting.
That seem unlikely in the near term.

By the time the oil can be exploited on a large scale it will be too late to make for declines elswhere.
Slow the overal rate of decline ? certainly.
Reverse the overall decline ? no way.

[PS_RalphW]

Serious analysis over at the oil drum sees Iraq increasing production by between 1-2Mbpd over the next few years. They will struggle to get more than that. They have only recently got production back to the level it was in 1980 before the Iran/Iraq war started. They have 30 years of war damage, sanctions and mis-management to reverse and their infrastructure is really creaking at the seams.

Only a couple of years ago Iraq was confidently predicting 12Mpb production by 2020. They are letting their more niave investors down gently.

[raspberry-blower]

Interesting piece recently posited on the comments section of said AEP article by Montaguewithnail about reserves:

Ambrose, from reading these comments I think that, if you
want to tell people something about oil, you should do an article on the
difference between 1P and 2P reserves.

Just a very quick and humble attempt here for those people who still think
global reserves are growing:

1P means "proven" reserves. This is a strict business/accounting term,
regulated by the SEC. It tells investors how much oil is proved with very high
certainty to be in place so that they can make financial/investment decisions.

2P means "proven and probable". It is this figure which is really of
interest to oil executives as it defines the LIKELY recoverable oil in the
reservoir. It is calculated using a probabilistic approach so it is not
appropriate for external investors to rely on because for any given field it
can be out by quite a bit. As with all statistically determined variables
however, when you add a huge number of them together, the standard deviation
gets tighter and tighter relative to the size of the sample and so if you add
up all the 2P reserves in the world you get a fairly accurate picture of how
much oil there has been discovered.

Here's the important thing:

When a new field is commissioned, at the start 2P is always much higher than
1P. As soon as 1 barrel of oil is extracted, 2P reserves are reduced by 1
barrel, and will continue to fall through the life of the field*

1P reserves however continue to RISE for quite some time as the field is
exploited. No new oil is being discovered, but as more and more wells are being
drilled and hard data being obtained, more of that reservoir falls within the
strict definition of 1P reserves. Only towards the end of the life of the
field, when no more wells are being drilled will 1P begin to fall, and at that
point 1P and 2P will be roughly the same.

It is as a result of these definitions that global 1P reserves continue to rise
even now (reported very mischievously by BP), while 2P reserves have been
falling for some time now. We are NO LONGER discovering more oil than we are
consuming each year.

* Actually 2P is also adjusted as and when more is discovered about each
reservoir, but it can go down as well as up. One thing which tends to push it
up more a bit more than down is extraction technology improvements, but this
has not been enough recently to offset the very low volumes being discovered versus
high volumes being consumed

[raspberry-blower]

Only a couple of years ago Iraq was confidently predicting 12Mpb production by 2020. They are letting their more niave investors down gently.

Actually, Ralph, Stuart Staniford who said Iraqi oil production could reach 12Mbo/d by 2020 which, if I remember rightly, was given a right panning by the resident experts at The Oil Drum.

Interesting looking at Stuart's linear graph - Iraq should be producing somewhere in the region of 6.5Mbo/d at the moment - it is highly unlikely that figure will ever be attained, particularly in light of the ongoing, currently low scale, civil war that wracks the country.

[PS_RalphW]

Stuart was simply accepting official Iraqi projections at face value. He did not invent the figure. He got a fully justified pasting for that post. Nobody else in the oil industry saw it as anything other than propoganda.

[mobbsey]

As the IEA says, this will require $530 billion of new investment.

That might sound a lot, but to put that into context Dieter Helm recently ran the numbers for how much is required for renewing/updating Britain's energy, transport and water infrastructure, and came back with a figure of £540 billion! ($864 billion)

In any case, do you really think Iraq's fragile tribal borders will survive the break-up of Syria? Recent events in Syria, and the support its drawing from neighbouring states, are turning it into a struggle between Shia and Sunni Islam -- the front line of which runs through Iraq.

[Lord Beria3]

To significantly increase Iraqs oil production will require a great deal of investment, and possibly imported expertise.

It appears unlikely that anyone will risk a lot of capital until peace and stability breaks out, and looks lasting.
That seem unlikely in the near term.

By the time the oil can be exploited on a large scale it will be too late to make for declines elswhere.
Slow the overal rate of decline ? certainly.
Reverse the overall decline ? no way.

Totally agree. The chance are remote that Iraq will magically turn into a stable pro-private business country which investors will flood money in in the near future.

I do see Iraqi oil production growing, but not on the levels projected in AEP piece. I do think that it is important to note that Ambrose himself is open minded and probably rather sceptical of these claims.

Still, the massive potential of Iraqi oil is clearly the main reason why Cheney-Bush invaded in 2003.

[PS_RalphW]

US special forces now in Jordan near the Iraqi border - Telegraph

also

http://www.reuters.com/article/2012/10/ ... 7720121010

[raspberry-blower]

Cat meets pigeons:

Moscow announced on Tuesday that Iraqi Prime Minister Nouri al-Maliki was in town and the two countries signed contracts worth "more than" US$4.2 billion in an arms deal that includes Iraq's purchase of 30 Mi-28 attack helicopters and 42 Pantsir-S1 surface-to-air missile systems

In the grand scheme of things this, on its own could be viewed as symbolic, however:

The joint Russian-Iraqi statement issued in Moscow revealed that discussions had beem going on for the past five months over the arms deal and that further talks are under way for Iraq's purchase of MiG-29 jets, heavy-armored vehicles and other weaponry. A Kremlin announcement said Maliki is due to meet President Vladimir Putin on Wednesday and the focus of the discussions will be energy cooperation between Russia and Iraq.

There is a growing possibility that the Iraqi oil will not end up in the Western market place after all.

Very interesting article by a former Indian diplomat:
http://atimes.com/atimes/Central_Asia/NJ11Ag01.html

[PS_RalphW]

But Russia is a major exporter of oil itself. Why would it want Iraqi oil? This is simply Russian expertise for Iraqi dollars/Rial/Reserve currency of choice.

[extractorfan]

But Russia is a major exporter of oil itself. Why would it want Iraqi oil? This is simply Russian expertise for Iraqi dollars/Rial/Reserve currency of choice.

Or geopolitics in deciding where the oil flows. Energy = power in more ways than one.

[mobbsey]

There is a growing possibility that the Iraqi oil will not end up in the Western market place after all.

I thought it was because of that special shopping centre that Putin runs on the edge of Moscow -- "Dictators R Us"