The conflict in Iraq is causing “serious doubts” about the country’s ability to achieve planned oil production and export increases, said the head of Crescent Petroleum, a closely held producer in the country.
“Iraq had been seen as a major exporter going forward with major potential,” Crescent Chief Executive Officer Majid Jafar said in a Bloomberg Television interview today. “It hasn’t delivered so far and with the current weakness of the state and conflict, there are even bigger concerns over its ability to deliver.”
Attacks by a breakaway al-Qaeda group whose fighters captured territory north of Baghdad and advanced on key energy infrastructure have put in doubt the central government’s rule. Prime Minister Nouri al-Maliki’s Shiite Muslim-led government is seeking to reassert control as its military assaults Sunni insurgents’ positions. Kurdish forces today said they had taken control of the city of Kirkuk and oil production facilities there.
Iraqi crude production capacity will increase by more than 1.2 million barrels a day in the six years through 2019, the International Energy Agency said June 13. Output surged to 3.4 million barrels a day in February, the highest level since 2000, and was 3.3 million last month, according to data compiled by Bloomberg.
Crescent Petroleum’s natural gas production in the northern Kurdish region of Iraq is running normally even as fighting rages between militants and state forces to the west, Jafar said. Crescent is taking security precautions in the semi-autonomous region and its facilities “haven’t been negatively impacted” by fighting. Crescent is producing about 80,000 barrels of oil-equivalent a day there, he said.
The company also has investments in Egypt and the United Arab Emirates, where it is based. It previously sought to import gas from Iran before that project stalled in a dispute over fuel prices.
Global markets will need Iran’s oil to be available to meet future energy demand, Jafar said. Negotiators from the Islamic republic and six global powers resume today in Vienna in an effort to limit Iran’s nuclear program in return for stopping economic and energy sanctions.
The Middle East has been losing share in global oil markets as output slips in countries like Libya and Iraq amid strife and from Iran due to sanctions, while North American output has increased from shale deposits.
“The problem we have in the Middle East, apart from the politics and the conflict, is huge energy subsidies and not the right incentives for investment by the private sector,” Jafar said. Rates of remuneration from production in the region aren’t high enough, he said.