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Unrealistic Iraq

The CEO of French supermajor Total, Christophe de Margerie, last week called Iraqi targets to develop a 10-12 million b/d crude production capacity unrealistic, telling an audience at the U.S. Columbia University that "the 12 million barrels is crazy", Reuters reports. "We know there's a potential to maybe reach 7 to 8 million barrels someday, and that alone would be a tremendous success", he said, but questioned the realism behind the Iraqi Oil Ministry’s hopes to raise the country’s production capacity from 2.5 million b/d to 12 million b/d in 10–15 years. De Margerie also expressed scepticism about the feasibility of the Western companies that recently secured contracts to develop the supergiant Rumaila, Zubair, and West Qurna-1 fields lifting output for those three fields by several million b/d in total within seven years, saying that this tight deadline was one of the reasons for Total's failure to secure the West Qurna-1 project, for which it bid. "Why aren't we going forward, why are we doing this? It's because at the end of the day Iraq will say this is what was promised," de Margerie said, according to Reuters, suggesting that the IOCs that have committed to the tight deadlines will face problems further down the line, when their performance will be assessed.

Significance: De Margerie might expose himself to charges of sour grapes, as Total has hitherto failed to secure any of the vast projects launched in Iraq. Nevertheless, this often outspoken and straightforward executive has a proven track record in delivering realistic assessments on a host of controversial issues. While the potential in Iraq is huge, the highest numbers tossed around over the past year by Iraqi oil officials do not reflect any consideration of global demand and OPEC output balances, yet takes into account plateau productions from fields whose reservoirs in several cases were only rudimentarily explored several decades ago. There will also be an astonishing logistical and infrastructural challenge to developing the Rumaila, Zubair, and West Qurna-1 projects, with questions about where to source the water for reinjection just being some among many against a deadline that would appear tight for similar-sized projects even in the most logistically safe environments in the world.

- Samuel Ciszuk / IHS Global Insight / 11/ 16 / 09 (samuel.ciszuk@ihsglobalinsight.com)

ISSUES.... 11/17/09

ISSUES.... Inside, confidential and off the record

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