Iraq is due to start pumping crude from two of its largest oil fields within weeks, creating a possible obstacle to future efforts by OPEC to curb supplies in the event of a drop in prices.
The Gulf state plans to start production at Majnoon within days, followed by Gharraf in July and West Qurna-2 by year-end, lifting capacity by 400,000 barrels a day, Oil Minister Abdul Kareem al-Luaibi told reporters in Vienna today before an Organization of Petroleum Exporting Countries meeting tomorrow. The nation, OPEC’s biggest producer after Saudi Arabia, currently pumps 3.125 million barrels a day, he said, without specifying output capacity.
While OPEC nations have achieved the best adherence to the organization’s production ceiling in 18 months, the 12-member group may need to increase discipline to stem price declines, according to the Centre for Global Energy Studies. Brent crude, used to price more than half the world’s oil, has lost 8.7 percent this year to trade at about $101 a barrel today.
“Saudi is likely to find any OPEC member’s, and not just Iraq’s, ability to produce more oil detrimental to its fiscal breakevens,” Abhishek Deshpande, an analyst at Natixis SA in London, said in an e-mail. “There are continuous attacks, unrest in Iraq and differences at government level within the country, so it’s not really a thorn as of now to OPEC, but soon could be.”
Output from Majnoon, the country’s third-biggest, will start “around mid-year” and increase to 175,000 barrels a day by the end of 2013, Mounir Bouaziz, Royal Dutch Shell Plc’s regional vice president, said May 16. Shell had “teething problems” mainly due to the unexpected quantities of unexploded munitions at the field, customs-related delays of imported equipment and hitches in processing entry visas, Bouaziz said.
All but one of 20 analysts in a Bloomberg survey predict OPEC will maintain its target of 30 million barrels a day at its meeting tomorrow.
Curbs by Saudi Arabia pared OPEC output to 30.6 million barrels a day in January, the closest to the group’s formal limit since its introduction in December 2011, data compiled by Bloomberg show. Production has since rebounded, reaching 30.9 million last month, about 900,000 a day more than both OPEC’s own target and the amount the International Energy Agency estimates will be needed in the second half.
Iraq, which holds the world’s fifth-largest oil reserves, overtook Iran last year to become OPEC’s second-biggest producer. The organization no longer publishes output quotas for individual members.