Friday, March 18, 2011

Iraqi Oil Production Reaches Post-Invasion High


Well, it's an exciting time to be blogging about "Risks to Global Civilization", what with Arab populations revolting against their dictators, nuclear power plants blowing up and spewing radioactivity, and now western militaries about to start bombing Libya any moment.  I hardly know which way to turn.

However, it's important not to lose track of the slower burning but equally important stories that affect the evolution of our global civilization.  One of these is Iraqi oil production.  Iraq is a country with enormous oil reserves that were rather under-exploited by regional standards due to the constant stream of wars and revolutions that have plagued the country for decades.  The graph above shows the last decade and a bit of oil production - you can see the declining production in the early aughties (due to UN sanctions on Saddam Hussein's regime), followed by the precipitous decline when the US invaded the country in 2003.  After that, production rebounded to a low level, improved a bit with the increasing stability in the country associated with the Petraeus surge, but then plateaued at or below 2.5mbd.

Then in 2009, then oil minister Hussein al-Shahristani presided over an extremely ambitious plan to auction off contracts to manage Iraq's oil fields to the big international oil companies.  All those contracts together sum to a total Iraqi production of around 12mbd, and they call for the operators to reach those plateaus in only seven years.  This is enough oil, and soon enough, that it would have a fair chance of materially postponing the global peak of oil production, and thus reducing the pressure on the world to transform into new, yet unclear, political and economic configurations.

Almost no-one believed that large an increase in oil production would happen that fast, but skepticism ranged from those who thought the country would collapse back into civil war and produce less oil, rather than more, to those who thought that Iraq would eventually produce a great deal more oil, but that perhaps logistical bottlenecks would prevent it happening as fast as Dr al-Shahristani had contracted for, and perhaps the eventual plateau would be lower.

In any case, through most of 2010, Iraqi production languished at levels slightly below those achieved in 2009.  Various stories came out as to this or that subcontract or drilling campaign, but it was too soon for it to translate into actual production.  However, in December of 2010 (or January of 2011, depending on which data source you want to believe), we finally have an uptick of production that has taken it clearly above the post-surge plateau.

Whether this is the beginning of a long slow uneven ramp-up as the al-Shahristani plan begins to take effect, or whether continued instability will engulf the country, I leave the reader to decide.  My guess is the former, but I acknowledge that huge uncertainty remains, so that reasonable people could differ.

7 comments:

kjmclark said...

OK, here's a related (though on the demand side) question. Japan has lost a significant amount of generating capacity, in a country that uses a great deal of electricity. Further, adding more nuclear power is probably largely off the table as a replacement for the capacity that's been lost. If the Japanese wanted to quickly replace the lost capacity, how would they do it? In the long-term they'll probably try for climate-neutral capacity, but in the next two years?

My guess is diesel generation at first, followed by LNG and gas turbines. I doubt the Japanese will opt for coal, and also doubt they'll try to use wind and solar to replace that much capacity in the short-term.

If we assume that it's largely diesel generation, how much diesel would it take to replace the nuclear capacity they've lost? (I'm assuming that dai-ichi is permanently gone, and dai-ni will also not be available in this timeframe.) There's been a little thought on this I've seen (like this: http://www.bloomberg.com/news/2011-03-13/refinery-margins-poised-to-surge-after-japan-quake-cuts-power-capacity-9-.html), but I don't think people have really thought about what this means for world diesel supplies.

Mike Aucott said...

They may have some extra capacity including older, less efficient gas, coal, or even residual oil units that can be brought to bear. But indeed it seems likely that at least some of the lost capacity will have to be made up with diesel.

Mr. Sunshine said...

A very basic run of the kW equivalents indicates - very roughly estimated: 4000MW/h = 96,000MW/h per 24 hour day. Oil = 41kW/hr per gallon. 42 gallon per bbl = 1723kW/h per barrel. Efficiency of oil-fired generator ~ 30%. 150,000bbls oil/day - but really, twice that, since you only get about 20 gallons of diesel per barrel. 8MM bbls oil per month, to replace the FUBAR nuke plant, then? Japan's present imports - about 4MM bbls/month, I think .. so it will be a lot of oil to make enough diesel.

BOP said...

Another perspective is to consider the amount of embedded energy contained in the destroyed human geography. To replace what was destroyed will require energy inputs equal to the original construction. This demand will be globally distributed; western NA lumber producers will use additional fuel to harvest, process and ship replacement timber construction material.

And before the reconstruction can begin significant energy will be required to to clear and dispose of the existing debris.

Not sure how you might calculate the required energy but if one reflects on the debates in regard to the embedded energy contained in corn (either as a fuel or food crop) it is clear that the amounts are non-trivial.

Alexander Ac said...

Hi Stuart,

you might like this graph:

the increase in public debt has reached the point of diminishing returns from Steve from Virginia,

cheers,

Don said...

Stuart,

Thank you for this analysis. IMHO, it is very powerful. Specifically, I put weight on the punch higher on the production graph, the "shape" or form of the longer term production graph from your Jan 2010 article, the collapse in the monthly death rate, and the breadth and depth of the majors involved. It's hard to fathom that they are in fantasy land... Regarding "shape", I invest for a living and have learned that properly viewed, graphs contain very pertinent information beyond just the numbers so represented. For example, one can easily see the lack of a "slowing" motion at each of the Jan article's long term production graph's highs. One can also observe the steep drops. This action is atypical of long term trend changes. They are in fact typical of exogenous events which when they recede, allow the prior trend to continue. So what may at first appear ambitious vis a vis production increase potential, may in fact be possible.

Since I tend towards the doomer view, this is very encouraging news, at least for the economy if not the environment...

Best Regards,

d

Hal said...

It would be interesting to see a chart of internal oil demand. I found this one, but it's annual demand, from CIA:

http://www.indexmundi.com/iraq/oil_consumption.html