Kurdish Oil Production Seen Doubling Next Year by Goldman Sachs

Iraq’s semi-autonomous Kurds, sparring with the nation’s central government over their right to export crude, may almost double oil production next year and triple it this decade, Goldman Sachs Group Inc. said.

The Kurdistan Regional Government could bolster output to about 540,000 barrels a day by the end of 2015 if it can expand pipeline capacity and surmount marketing constraints, analysts including New York-based Head of Commodities Research Jeff Currie said in a report yesterday. The KRG and authorities in Baghdad have clashed over the Kurds’ attempts to sell oil independently, including over a tanker currently anchored off Galveston, Texas.

Iraq will be the biggest source of new capacity this decade in the Organization of Petroleum Exporting Countries, the group responsible for 40 percent of the world’s oil, according to the International Energy Agency. Brazil will the second-largest source of supply growth outside OPEC after North America, boosting output by 48 percent to 3.1 million barrels a day by 2019, the IEA predicts.

“With Brazil and South Iraq, it’s the largest growth potential in the industry outside North America,” Michele Della Vigna, the bank’s head of European energy research, said in an interview in London yesterday. “There will be enough buyers of Kurdish crude in the market. The greatest uncertainty at this point in time surrounds the payment mechanism to the producers and security of installations and pipelines.”

Reaching 540,000 barrels a day by the end of 2015 will require that Kurds have access to the main export pipeline to Turkey’s port of Ceyhan, and that the Baiji refinery is restarted, Goldman Sachs said. Output will be limited to 110,000 barrels a day at the end of next year if those conditions aren’t met.

Production could exceed 1 million barrels a day by the end of the decade, Goldman’s Della Vigna said. The Kurds are producing about 280,000 barrels a day currently, according to the report.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net; Claudia Carpenter in London at ccarpenter2@bloomberg.net

To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net Rachel Graham, Sharon Lindores

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