Mideast oil reserves soar, as Iran and Iraq claim higher Opec quotas
THE WORLD has more oil than previously thought
Just a week after Iraq said its recoverable reserves had grown to more than 143bn barrels, a 24% rise that put its endowment second only to Saudi Arabia's, Iran hit back on 11 October, claiming a surge in its own oil reserves. Iran's revision increased its reserves by 9%, to 150.31bn barrels, enabling it to leapfrog Iraq and claim Opec's – and the world's – second-biggest deposit of recoverable conventional oil.
Iraq's reserves revision, the first since the US-led invasion in 2003, is the more plausible. It comes in the wake of new exploration by international oil companies (IOCs), especially of fields in the south of the country. ExxonMobil and Shell are developing West Qurna 1; a venture between Lukoil and Statoil are developing West Qurna 2; and Zubair is under development by Eni, Occidental and Kogas. West Qurna alone could hold 43bn barrels of oil, says energy minister Hussein al-Shahristani and he expects further exploration to yield "other increases of even these fixed reserves".
The justification for Iran's revision is less obvious. International sanctions have prevented Western firms from operating in the country and, consequently, upstream investment has plummeted. Analysts also say Iran's mature oilfields need heavy injection of natural gas to enhance recovery. With little verification by IOCs, doubts will persist about Iran's reserves.
The motivation for both reserves increases is clearer. Opec's production quotas are based on each member's stated oil reserves – not on its production capacity – so claiming a bigger oil endowment makes political and economic sense. Although Iraq has been excluded from the quota system since 1990, this could soon change.
The country's output stands at 2.4m barrels a day (b/d) and the government has said it will not try to negotiate a quota with Opec until production reaches around 4.5m b/d. Opec's secretary-general, Abdalla El-Badri, told Petroleum Economist earlier this year, however, that such discussions could take place in 2011.
This will matter, because the country wants to lift output to 12.5m b/d by 2020, which would make it the world's largest oil producer. Analysts doubt such an ambitious plan can be pulled off. But production of even half that target would cause a headache for Opec and its dominant member, Saudi Arabia.
Meanwhile, Iran's new reserves figures will also give Opec members pause for thought, suggests Samuel Ciszuk, an analyst at IHS Global Insight. The country's Opec peers may question the veracity of Iran's data, he says, in light of the country's technology deficit, which especially affects its ability accurately to model reserves. An increase in Iraq's market share at the expense of Iran's would, however, "be a very harsh blow", he says.
Meanwhile, Opec agreed at its meeting in Vienna on 14 October to roll over its existing quotas, which have been in place since December 2008. "Everyone is happy with the market," said Saudi oil minister Ali Al-Naimi. "The price is good." The Brent front-month contract was trading just above $85 a barrel in London after the meeting, $10/b above Opec's target range.