The International Energy Agency’s top economist warned in an interview with AFP that any unexpected slowdown in the growth of Iraq's energy output would be “bad news” for the rest of the world.
Fatih Birol noted that while such a slowdown was not the IEA’s central forecast, it remained a credible-enough possibility that the organization included it in an upcoming report on Iraq’s energy industry due next month.
His remarks come amid a dramatic ramping up of the country's oil output, with Iraq earlier this year overtaking Iran to become the second-biggest producer within OPEC, and more increases are expected in the coming years.
“If it doesn't grow, ... (if) the growth stays much more modest than any sensible expectation... then this would mean that the major difficulties (would) continue within Iraq, but also very bad news for the global oil markets,” IEA Chief Economist Birol said in his Paris office on Monday.
“It will be mainly countries like China, European countries, and other developing Asian countries, which will be affected. The growth of oil demand is coming mainly from China and Asian countries, and higher prices would also affect the European economy, which is already very fragile.”
Birol stressed that this remained an “unlikely possibility” but noted that he thought “it is important enough that we look into it. It also shows the entire world how much we need Iraq and what kind of crucial role Iraq will play in the next years to come in the global oil markets.”
He said that his central thesis was that Iraq would “play an increasingly critical role in supplying global markets, and make sure that the oil production grows in a healthy manner which will bring prosperity to its people and meet global oil demand growth.”
Asked if any other country could replicate the increases in production Iraq was forecast to bring in the coming years, he replied: “I don’t see any other country which could match Iraq, which could bring so much oil in such a short period of time.”
Birol declined to specify what would qualify as sufficiently slower than expected growth to impact oil markets, adding that precise figures and forecasts would be available in the IEA’s report, the Iraq Energy Outlook, due to be published on Oct. 9.
Iraq currently produces around 3.2 million barrels of oil per day, and exports, which account for the lion's share of government income, are currently at around 2.5 million bpd.
The country has proven reserves of 143.1 billion barrels of oil and 3.2 trillion cubic meters (111.9 trillion cubic feet) of gas, both of which are among the largest in the world.
Crude exports account for the lion’s share of government income, and Baghdad is looking to dramatically ramp up both production and sales in the coming years, bringing in much-needed cash to rebuild its conflict-battered economy.
Birol pointed to projected increases in internal demand, as a result of efforts to improve electricity provision and provide fuel for what is expected to be a wealthier society, as one factor that would impact future oil revenues, as well as political and geopolitical challenges.
He declined to give details on what particular challenges were biggest for the country, but noted that “the integrity of Iraq is of utmost importance, the territorial integrity of Iraq,” alluding to disputes between the central government and the autonomous Kurdish region over oil exports.