Massive Iraqi Oil Reserves Due to Come Online In 7 Years

Production has rebounded from just over 1 million barrels per day after the invasion to nearly 3 million today. Baghdad's 11 international oil contracts promise to deliver a total of more than 13 million barrels per day within seven years -- a figure that would make Iraq the largest oil producer, ever. _FP

By some reckonings, Iraq has the world's largest oil reserves, with massive oil fields that have barely been touched. And since Iraq -- like so much of the Persian Gulf region -- has been so under-explored in comparison with North America, other giant oil fields could lie waiting to be discovered.

But is the world ready for another 10 million barrels of oil per day, every day? Probably not.

In October 2009, Shahristani signed a deal -- without parliamentary approval -- with oil giant BP to rehabilitate the Rumaila oil field. Then came ExxonMobil, with a contract for the 8.7 billion-barrel West Qurna Phase 1 field. Those two fields hold more proven oil reserves than the entire United States has, and if the terms of just those massive contracts are met, Iraq will reach more than half of Saudi Arabia's current production before the end of this decade.

...if Iraq's fields were to increase production any further right now, the oil would have nowhere to go. There aren't enough pipelines, storage tanks, refineries, and export terminals. Iraq is building many of these facilities, but probably not fast enough for the production rates that the state is now contractually obliged to support.

Nor is it clear whether world markets could stand so much new supply. If Iraq were actually able to increase production to the unprecedented height of 13 million barrels per day within seven years, the price of oil would likely drop just as steeply. _FP

Demand for oil in the developed world has been declining for years now. Demand for oil in emerging markets has been artificially boosted by subsidies and ill-conceived stimulus programs -- particularly in China. It is unclear how much longer such artificial demand can be sustained.

If you somehow pump out another 10 mmbd onto the market, some very bad things could happen to profits for oil producers such as Russia and OPEC. Perhaps that is why wealthy factions inside Saudi Arabia have been helping to finance Sunni Muslim terrorists to disrupt oil production in Iraq and elsewhere in Shia and non-Sunni Arab dominated areas. Too much oil production can be bad for an oil dictator's profits.