Again a power in OPEC, Iraq could shift landscape

By Kay Johnson

Associated Press

Published: Friday, June 15 2012 7:32 a.m. MDT

In the last year, a rapid expansion of oil production has been a rare positive sign in a troubled democracy still facing spasms of violence.

Iraqi oil exports have grown from an average 1.9 million barrels a day average in 2009 to about 2.5 million barrels a day in May. That is about the same level that Iran was exporting last year, but Tehran now exports less than 1.8 million barrels per day now because of American sanctions, U.S. officials estimate.

With 143.1 billion barrels of proven oil reserves — the fourth-largest in OPEC — Iraq has plenty of room to grow.

Iraq's expansion in coming years could wreak havoc with OPEC's system of production quotas, according to analyst Ciszuk. The organization wavers between individual country quotas and the current system of an overall production limit for all countries, which it decided Thursday to keep at 30 million barrels a day.

In recent decades, Iraq's oil hasn't figured in that system because its exports were underperforming. But once it surpasses Iran, OPEC members will likely demand that Iraq rejoin the quota system.

With Iraq pumping 3 or 4 million extra barrels a day, other countries would face the choice of either cutting their own quotas to accommodate Iraq or raising the overall production level.

Its ambitious expansion goals and contracts with major oil companies such as Exxon Mobil Corp., BP PLC and Royal Dutch Shell PLC depend on pumping more and more oil, so Iraq's own self-interest in coming years is likely to reverse its stance of pushing for production cuts — despite its political relationship with Iran.

"In the end, you know, it tends to be the money that decides a lot of these things," Ciszuk said.

Associated Press writers Sinan Salaheddin in Baghdad and George Jahn in Vienna contributed.

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