BAGHDAD — Iraq's oil minister on Monday sharply boosted the estimate on the country's proven oil reserves to 143.1 billion barrels, an almost 25 percent increase that transforms the war-ravaged nation into the home of the world's second-largest proven reserves of conventional crude oil.
The new figure reflects reserves “that can be extracted by available techniques in the country,” Hussain al-Shahristani told reporters, adding that this total is based on reserves in 66 oil fields. He said there “are other areas to be explored that are expected to add” more to the reserve total.
The increase is as important psychologically for Iraq as it is economically and practically.
The oil-rich nation, which was the birthplace for the Organization of the Petroleum Exporting Countries, has struggled to raise its oil production and exports after years of sanctions and wars left much of the vital sector in poor shape. Iraq currently exports roughly 1.9 million to 2 million barrels per day — which accounts for nearly all its foreign currency revenues.
But with Saddam Hussein's ouster in 2003, attention turned again to revamping the sector. Two international oil licensing rounds last year opened the door for international oil firms to re-enter the Iraq market. Among the tasks they undertook were new seismic surveys of the fields which they were awarded — efforts that have contributed to raising the overall reserve estimate.
Al-Shahristani said that West Qurna, a behemoth in the oil-rich southern region, had reserves of 43.302 billion barrels, making it the world's second-largest field.
He said the revision in the reserve total was based on exploration efforts which the country launched two years ago.
Al-Shahristani said that the actual reserves were upward of 176 billion, but that 33.5 billion barrels had so far been extracted over the past decades, leaving the country with 143.1 billion in proven reserves.
Iraq hopes that new production from the 10 oil fields awarded during the two auctions will raise overall output to 12 million barrels per day by 2017 — a level that would put it nearly on par with Saudi Arabia's current production capacity.
“Iraq will officially inform OPEC today in order for these new reserves to be recognized internationally.” al-Shahristani said.
“We expect other increases of even these fixed reserves,” he said, referring to expectations that continued exploration will result in even more discoveries.
For years, Iraq's proven reserves of crude were listed at 115 billion barrels, with no revisions announced largely because little in the way of field assessment or new exploration was taking place under Saddam's reign.
That figure meant Iraq was listed as having the world's third-largest proven reserves of conventional crude, with Saudi Arabia claiming the top spot with 264.6 billion barrels and Iran ranking second with 137.6 billion barrels, according to the latest BP Energy Statistical Review.
Factoring in unconventional crude sources, Canada and Venezuela both had far greater reserves than Iran and Iraq. But such reserves, which include oil shale and the tar-like bitumen, are generally far harder to extract than conventional crude oil and are recoverable only at oil prices far higher than those needed to extract oil from countries like Iraq and Saudi Arabia.
Most analysts agree that Iraq's hopes for raising oil production to 12 million within the next few years are overly optimistic. But even a boost of a few million barrels per day are key to Iraq, which needs the money from oil sales to rebuild after the decades of sanctions as well as the lingering aftereffects of the U.S.-led invasion to oust Saddam.
Currently, Iraq is not counted in the production quotas to which OPEC's 12 members are bound. But expectations are that the country will be obliged to comply with those restrictions within the next few years, meaning that it could face serious challenges to raising its overall exports without risking squeezing oil prices.
Luay al-Khatteeb, executive director of the London-based Iraq Energy Institute, said the increase was smaller than some analysts had expected, with some estimates of Iraq's reserves reaching as high as 200 billion to 300 billion barrels.
Al-Shahristani “wanted to play it conservative,” he said, adding that the announcement was likely aimed at gaining leverage within OPEC to boost its production targets once quotas for Iraq are reinstated.
“Iraq's quota is 30 years old,” al-Khatteeb said. “For us to move to the 5 or 6 million (barrels per day production) mark, we need to show at least 150 billion barrels of reserves.”
However, any gains from the increased reserve figure won't be seen for now because Iraq is still working to boost production.
“It's not about how sizable are the reserves. Give me any production increase in the short term, or at least arrest the declines,” he said.
Among the internal challenges Iraq faces is continuing squabbles between the central government in Baghdad and the Kurdish government in the semiautonomous north. The Kurds have operated for years with little restrictions on their oil sector, and the issue of how much say they will continue to have deals signed in the north is a source of concern for both sides, as well as international companies operating in the region.
In a reflection of the lingering tension between the Kurds and the Baghdad government, al-Shahristani said the new reserve figures “do not include oil reserves in the Kurdish region.”
“The Kurdish regional government did not supply us with latest developments of their activities,” he told reporters. “We are surprised that they supply oil companies with this information, but do not inform the oil ministry or the federal government.”