IEA Releases Report on Iraq’s Energy Resources and Potential

The special report entitled “Iraq Energy Outlook” is part of the IEA’s World Energy Outlook series.

Iraq is currently the world’s third largest oil exporter – behind Saudi Arabia and Russia – and the Baghdad government has signed contracts with international and national oil companies which have the potential to boost output well over 12 million barrels per day.

This theoretical threshold – based on the cumulative targeted output plateaus in the signed contracts – is neither realistic, not desirable given the potentially negative price impact associated with flooding the global oil market with such incremental volumes and Iraq’s role within the Opec producer group, along with numerous other factors.

The IEA recognizes this and concludes that in their central scenario, “Iraq’s oil production more than doubles to 6.1 mmb/d by 2020 and reaches 8.3 mmb/d in 2035.” In the high case, output reaches 9 mmb/d in 2020 and exports top 7mmb/d by that date.

Iraq’s energy sector holds the key to the country’s future prosperity and can make a major contribution to the stability and security of global energy markets, the International Energy Agency (IEA) says in a special report of the World Energy Outlook released today – the first time that the IEA has conducted a comprehensive review of the energy sector of a major Middle East producer.

The Role of Renewables

  • “…potential for new hydroelectric plants, two of which – the Bekhma and Badoush dams on the Tigris River – saw the start of construction during the 1980s, but work was abandoned in the wake of the sanctions imposed in the 1990s.”
  • “The Ministry of Electricity has a number of off-grid solar research stations, with capacity of a few tens of megawatts (MW). Despite the strength of the resource, grid-connected solar electricity generation – either through photovoltaics (PV) or concentrating solar power (CSP) – will remain a very high-cost option, compared to fossil fuels. Our Central Scenario assumes a small amount of solar PV capacity – less than 50 MW – is added by 2035.”
  • “Our Central Scenario does not assume any large-scale development of wind energy or biomass resources during the Outlook period, though international collaboration could help to change this picture.”

The IEA’s Iraq Energy Outlook finds that Iraq makes by far the largest contribution to global oil supply growth over the coming decades, with current production of 3 million barrels per day (mb/d) more than doubling by 2020 and going on to reach more than 8 mb/d by 2035. Iraq becomes a key supplier to fast-growing Asian markets, mainly China, and the world’s second largest oil exporter by the 2030s, overtaking Russia.

“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,” said IEA Executive Director Maria van der Hoeven.

“Developments in Iraq’s energy sector are critical for the country’s prospects and also for the health of the global economy.” said IEA Chief Economist Fatih Birol, the report’s chief author. “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. The report estimates that, if planned new capacity is delivered on time, electricity generation will meet Iraq’s demand for power in 2015. Natural gas can play a much more important role in Iraq’s future and a vital first step will be to reduce the amount of gas that is currently flared. Once domestic needs are met, Iraq can 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 over the period to 2035 will require over $530 billion in energy investment in Iraq, with the annual investment need highest in the current decade. But Iraq stands to gain much more – almost $5 trillion in revenues from oil export over the same period (an average of $200 billion per year). Revenues of this magnitude can transform Iraq’s future prospects, with the potential to stimulate much-needed economic growth and diversification. To achieve these ambitions, Iraq will need strengthened institutions and human capacity, a stable regulatory framework and sound long-term strategies for the energy sector, and efficient, transparent management of revenues and spending.

The Iraq Energy Outlook has been produced in close co-operation with the federal government of Iraq, the regional and provincial governments and officials across many government bodies, including fact-finding visits by the IEA team to Baghdad, Erbil and Basrah.