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August 30th, 2012

Iraq??s Oil Production Passes Iran

by Andrew Price, President & COO

Iraq's oil production has grown steadily over the past several years while oil output in Iran has eroded. Production in Iraq exceeded 3 million barrels per day in July, about 300,000 barrels higher than its average output during 2011, according to the International Energy Agency (IEA). Iraq’s daily output is now second only to Saudi Arabia in the Organization of Petroleum Exporting Countries (OPEC). Unlike other OPEC members, Iraq is not assigned a production quota and is free to produce as much oil as possible. The IEA reported that oil output in Iran dropped to 2.9 million barrels per day in July.

Iraq has proven oil reserves of about 143 billion barrels, ranking 5th in the world. This number is likely to grow as much of Iraq has yet to be explored for oil. Iraq also has 3.2 trillion cubic meters of natural gas, ranking 11th in the world.

Iraq is poised to rapidly expand oil production. The near term production goal is 3.4 million barrels per day by the end of 2012, with 2.6 million barrels being available for export. In the long term, Iraq has designs to produce as much as 11.65 million barrels per day by 2017 which would put it in direct competition with Russia and Saudi Arabia for the distinction of being the largest oil producer in the world. This goal may be very optimistic, but even half of this target would have big implications for world oil markets. 

Rank Country Reserves (million bbl)
1 Venezuela (OPEC) 290,100
2 Saudi Arabia (OPEC) 269,800
3 Canada 175,200
4 Iran (OPEC) 150,600
5 Iraq (OPEC) 143,500

Oil accounts for most government income in both Iraq and Iran. Iraq is just starting to overcome decades of war and sanctions. Major oil companies including BP, Exxon, Chevron, Total and China's CNPC are all investing in Iraq under contracts that guarantee the Iraqi government among the highest royalty rates in the world. Meanwhile, new sanctions by the US and Europe have severely limited oil exports from Iran.

The gap between these two rivals looks like it will continue to grow in the near term as Iran continues to spurn the West and pushes forward with its development of nuclear technology and Iraq focuses on growing its oil output.

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