Iraq Oil Output Has Reached a 20-Year High, Shahristani Says

Iraqi crude oil production jumped to the highest level in at least 20 years, or more than 3 million barrels a day, said Hussain al-Shahristani, deputy prime minister for energy affairs.

Iraq’s government, which takes complete control of the country this month after the withdrawal of U.S. military forces, will acquire unmanned drone aircraft to help protect pipelines and related energy facilities that have been frequent targets of sabotage, he said today in an interview in Baghdad.

He spoke hours after nine bombs exploded in the capital Baghdad, killing at least 57 people in attacks that underscored instability and divisions as the U.S. ends almost nine years of military presence in the country. Iraq holds the fifth-biggest natural-gas reserves in the Middle East and the world’s fifth- largest crude deposits, according to BP Plc data that include Canadian oil sands.

“Iraq’s crude production will rise to 3.4 million barrels a day by the end of next year, and exports will rise to 2.6 million barrels a day, including 175,000 barrels from fields in the northern Kurdish region, next year from a current average of 2.2 million barrels of oil a day,” he said.

Iraq’s first single-point mooring facility for oil tankers will begin operating in January, he said. A second unit will be in place within six months, a third one by the end of next year and a fourth in 2013, he said. Each of the four facilities will add 900,000 barrels a day of exporting capacity for crude oil, he said.

Exxon Mobil

The Iraqi government is “weighing measures” that may be taken against Exxon Mobil Corp. (XOM) after it signed contracts the government considers illegal with authorities in the semi- autonomous Kurdish region, Shahristani said. “We will wait for Exxon Mobil’s answer before taking a decision.”

Exxon, which has not commented publicly on the matter, is operating with Royal Dutch Shell Plc in southern Iraq at the West Qurna field, one of the nation’s biggest.

“The contract that Exxon Mobil has signed for the development of West Qurna Phase 1 commits the company to respect Iraqi laws and the regulations of the Oil Ministry,” he said. “Any contract brokered to develop, explore or produce crude oil or gas in Iraq without the knowledge of the central government is considered null and the company cannot work on the basis of these kinds of contracts.”

Oil Exports

The Baghdad government is entangled in a dispute with Kurdish regional authorities over crude revenue and refuses to recognize production-sharing agreements signed by the Kurds with foreign companies without its approval. The central government agreed in February to resume exports from the semi-autonomous region and has transferred two payments to foreign companies, including DNO International ASA (DNO), operating in the area. The companies have yet to receive a third payment.

Kurdistan is failing on its commitment to deliver 150,000 barrels a day, only shipping an average of 70,000 barrels a day to 80,000 barrels a day, Shahristani said. The Kurds have also failed to present a list of the wells and equipment in Kurdistan that the central government has agreed to pay for in the February accord that helped to resume crude exports from Kurdistan.

“We will not pay without receiving the list,” he said. “Iraq is not committed to pay any company that did not sign an agreement with the Iraqi government.”

Iraq has signed 15 gas and oil licenses since the 2003 U.S.-led invasion that ousted former President Saddam Hussein. The government needs foreign investment and expertise to boost energy exports and rebuild an economy shattered by years of conflict, sanctions and sabotage. The Kurds on their part signed contracts with more than 40 energy companies.

To contact the reporters on this story: Kadhim Ajrash in Baghdad at kajrash@bloomberg.net; Nayla Razzouk in Dubai at nrazzouk2@bloomberg.net

To contact the editor responsible for this story: Bruce Stanley at bstanley5@bloomberg.net

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