Iraqi oil production cutback plan adds to global supply fear ?  

Posted by Big Gav in , ,

The battle for control of Iraq's oil seems to be moving into interesting territory, with the US due to remove all troops from the country by the end of the year (something which will never happen of course).

In the lead up to the last Iraqi election there was a spurt of deals done which didn't give the international oil companies particularly good terms - now the election is over and the punters are back in their usual position of having no influence, these deals are looking to be renegotiated - within production levels being reduced and the oil majors getting a bigger cut of the action - another case of history repeating itself.

The Australian has a good example of how this is being reported, focusing on the national production targets being reduced rather than where the money is going - Iraqi oil production cutback plan adds to global supply fear.

IRAQ is preparing to halve its official oil production target, forcing companies including BP and Shell to renegotiate their contracts.

The country's Oil Ministry, with backing from the Prime Minister Nouri al-Maliki, will set a new target to produce between 6.5 million and 7 million barrels per day by 2017, down from original plans to pump 12 million barrels, according to industry insiders.

Iraq, which is a member of the OPEC cartel that pumps 40 per cent of the world's oil, produces about 2.68 million barrels a day, barely higher than under Saddam Hussein.

It had been hoped that with a huge injection of foreign investment, it would be able to challenge Saudi Arabia as the world's biggest oil exporter this decade.

Confirmation it has scrapped the old target will add to fears that global supply will be unable to keep pace with demand in coming years.

It is understood that government negotiations to change the long-term service agreements signed by companies in the past two years based on the old production target will begin soon.

Analysts said companies would seek improved terms to compensate them for losing out on revenue, which at present is earned for each barrel of oil produced above a base target.

Baghdad believes it would not be in its interests to try to achieve the 12 million target by 2017 because boosting global supply would depress prices.

Ministers also argue that there is not sufficient demand for the extra oil, despite soaring prices. Last month, Saudi Arabia cut its output by 800,000 barrels a day after pumping more in response to the political crisis in North Africa, complaining that the extra crude was sitting in tankers with no customers.

High oil prices, which have doubled since the 12 million target was set two years ago, will compensate Iraq for the lower production. ...

Samuel Ciszuk, senior energy analyst for IHS Energy, said an over-ambitious target was politically motivated, being set before elections in 2009. "It was clearly designed to impress the Iraqis ahead of the elections. The oil majors will now seek more attractive terms."

Moon Of Alabama has a cynical view of some of the diplomacy being undertaken in Iraq as the troop withdrawal date looms - The Extortion Of Iraq.
The consigliere was send out to deliver first a threat
Gates: Iraq will face problems if U.S. troops withdraw

"They will not be able to do the kind of job in intelligence fusion. They won't be able to protect their own airspace. They will have problems with logistics and maintenance."

then an offer
Gates: Some US troops may stay if Iraq wants

and making clear that it can not be refused
Gates Presses Iraq to Decide on Extension of U.S. Presence

But the guy in charge of pizza joint says "No!"
Sadr calls for an end to 'US occupation'

Al Jazeera correspondent Jane Arraf, reporting from Baghdad, said that this time Sadr had not only warned US troops but also the contractors.

What will the mafia Don do next?

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