Barclays on European Oil & Gas Weekly: Iraq - and a Hard Place to Lift Volumes
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22 Buy, 14 Hold, 4 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Barclays on European Oil & Gas Weekly: Iraq - and a Hard Place to Lift Volumes
Barclays analyst said, "At the start of the year the picture looked bright for Iraqi oil volumes. Both BP (NYSE: BP) and Eni (NYSE: E) who secured licences in the first Iraqi licensing round, reached cost recovery on the Zubair and Rumaila projects, reflecting the 10% uplift in volumes that had been achieved on those fields. Year-to-date Iraqi volumes have averaged 2.7m b/d - an 11% uptick on 2010. However, the month-to-month progression this year has not been significant, with August volumes only 2% higher than January and production in the South inhibited by export bottle necks. BP signalled on its trip to Iraq in June that Rumaila production - with a licence target of 1.5m b/d by the end of this year - is likely only to reach 1.3m b/d. The Iraqi authorities now seem to be acknowledging that the pace of ramp-up may be slower than originally envisaged. The oil minister is suggesting that the contracts with the IOCs may be renegotiated to reduce target volumes from 12m b/d to 8-8.5m b/d and to more than double the proposed schedule for achieving these volumes, from seven to fifteen years. Our analysis shows that if 50% of target volumes were delivered, spare capacity by mid decade would still be well below 4% of anticipated global utilisation."
"Incremental Iraqi volumes needed: If all the projects licensed under the first and second rounds were to come on stream on the original projected timelines, this would see an increase in productive capacity of almost 10m b/d by 2018. None of the companies with exposure to these licences believes that it is realistic to see all the productive capacity delivered on the original timeline with security, service company and pipeline availability and water access all cited as constraints. BP is only forecasting 4.5m b/d of total Iraqi volumes by 2020 within its Energy Outlook 2030."
Barclays analyst said, "At the start of the year the picture looked bright for Iraqi oil volumes. Both BP (NYSE: BP) and Eni (NYSE: E) who secured licences in the first Iraqi licensing round, reached cost recovery on the Zubair and Rumaila projects, reflecting the 10% uplift in volumes that had been achieved on those fields. Year-to-date Iraqi volumes have averaged 2.7m b/d - an 11% uptick on 2010. However, the month-to-month progression this year has not been significant, with August volumes only 2% higher than January and production in the South inhibited by export bottle necks. BP signalled on its trip to Iraq in June that Rumaila production - with a licence target of 1.5m b/d by the end of this year - is likely only to reach 1.3m b/d. The Iraqi authorities now seem to be acknowledging that the pace of ramp-up may be slower than originally envisaged. The oil minister is suggesting that the contracts with the IOCs may be renegotiated to reduce target volumes from 12m b/d to 8-8.5m b/d and to more than double the proposed schedule for achieving these volumes, from seven to fifteen years. Our analysis shows that if 50% of target volumes were delivered, spare capacity by mid decade would still be well below 4% of anticipated global utilisation."
"Incremental Iraqi volumes needed: If all the projects licensed under the first and second rounds were to come on stream on the original projected timelines, this would see an increase in productive capacity of almost 10m b/d by 2018. None of the companies with exposure to these licences believes that it is realistic to see all the productive capacity delivered on the original timeline with security, service company and pipeline availability and water access all cited as constraints. BP is only forecasting 4.5m b/d of total Iraqi volumes by 2020 within its Energy Outlook 2030."
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