Gulf Keystone raises Kurdish oil reserves  

Upstream Online has a report on an increase in Iraqi oil reserves - Gulf Keystone raises Kurd reserves.

London listed Gulf Keystone Petroleum today raised its reserve estimate for the Shaikan find in Iraq’s Kurdish region to between 1.9 billion and 7.4 billion barrels.

"This discovery greatly reduces the geologic risks in the Sheikh Adi, Akri Bijeel and the Ber Bahr blocks, Gulf Keystone's adjacent opportunities," Dynamic Global Advisors said to the company in an evaluation report on the well. "The Shaikan discovery proves the presence of hydrocarbon source and migration in the area."

In thinking about how to synthesize all the key drivers of oil production/demand, it seems like the period between now and 2017 is of particular interest - the contracted-for plateau for the new contracts in Iraq is seven years out, and they are being signed over the next few months. Furthermore, if the meteoric rise in the Chinese car fleet were to continue, then it would reach the size of the US fleet somewhere around 2017.

So it seems of interest to try to construct uncertainty envelopes of some of the key variables and then try to fit them together into a range of reasonable overall scenarios.

Probably the largest uncertainty in the evolution of the global economy over that timeframe is the uncertainty about Iraqi oil production. In the graph above (click for a larger version), I give my subjective guesstimate of the 90% confidence interval, with a "Low Projection" for if things go very badly from the perspective of Iraqi oil production, and a "High Projection" if things go very well.

The reasoning behind the "High Projection" is as follows: the country in the past produced a maximum of 3.5mbd and likely doesn't have much more capacity to produce and distribute/export the oil than that. The giant megaprojects in Iraq required for the al-Shahristani plan would take three years if they were in Saudi Arabia, so let's allow four as the best case in Iraq, given it's a much more difficult environment to operate in than Saudi Arabia, which has far more infrastructure and has been stable for a long time. So then the idea is that things continued to get fixed over the next couple of years up until the 3.5mbd level has been reached. Production plateaus out there for a while, until all the various elements of the al-Sharistani plan start to come together, and all projects hit their plateau together at the start of 2017. For lack of basis for making a more complex plan, I just linearly interpolated between these various constraints.

Hopefully, the reader will agree that it's hard to imagine things going much better than that.

For the low projection, the assumption set is that the elections in March result in renewed civil war, that the US leaves despite the renewed unrest, and the country descends into increasing fighting, with only a small amount of oil exported intermittently. Obviously, the smooth estimates in my "Low Projection" above are just a general indication of what this might look like.