Iraqi oil could transform global energy markets, IEA says

Fatih Birol IEA World Energy OutlookIraq's energy sector could play a major part in the country’s future prosperity and the stability and security of global energy markets, the International Energy Agency (IEA) has said in a World Energy Outlook report

The report, released on 9 October 2012, predicted that Iraq would make the largest contribution to global oil supply growth over the coming decades, with a current production level of three million barrels per day (mbpd) expected to more than double by 2020, going on to reach more than eight mbpd by 2035.

Maria van der Hoeven, executive director of IEA, said, “This landmark study confirms the increasing importance of Iraq to the global energy system, highlighting the key role it is expected to play in meeting growing energy needs and the responsibilities it will assume as a strategic source of world oil supply.

“Put simply, this report shows that we all have an interest in Iraq realising its potential and revitalising its economy,” van der Hoeven added.

The report predicted that Iraq will become a key supplier to fast-growing Asian markets, particularly China, and will overtake Russia to be the world's second largest oil exporter by the 2030s.

IEA chief economist Fatih Birol, the report’s main author, commented, “Developments in Iraq’s energy sector are critical for the country’s prospects and also for the health of the global economy. But success is not assured, and failure to achieve the anticipated increase in Iraq’s oil supply would put global oil markets on course for troubled waters.”

Catching up with rising demand for electricity is a critical domestic challenge, as prolonged power cuts are still experienced on a daily basis in many parts of the country, with many people only receiving eight hours of electricity on average per day.

IEA estimated that, if planned new capacity is delivered on time, electricity generation will meet Iraq’s demand for power in 2015. Natural gas could play a much more important role in the country’s future and a vital first step would be to reduce the amount of gas that is currently flared, it said.

Once domestic needs are met, Iraq could also provide a cost-competitive source of gas supply to neighbouring countries, to European markets and to Asia, according to the report.

Meeting the anticipated levels of oil, gas and power supply until 2035 would require over US$530bn in energy investment in Iraq, with the annual investment need highest in the current decade, it added.

However, it is reported that Iraq stands to gain almost US$5 trillion from oil export revenues over the same period (an average of US$200bn per year). Revenues of this magnitude could transform Iraq’s future prospects, with the potential to stimulate much-needed economic growth and diversification, IEA said.

It concluded that to achieve these ambitions, the country would need to strengthen its institutions and human capacity alongside introducing a stable regulatory framework and sound long-term strategies for the energy sector.

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