Iraq to stay ahead of Iran for now in rivalry for OPEC No.2 spot

Mon Jun 9, 2014 7:58am EDT
 
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By Alex Lawler

VIENNA (Reuters) - A full lifting of sanctions on Iran could spark new rivalries within OPEC as Tehran seeks to reclaim its rank as No. 2 producer from former foe Iraq.

The two neighbors both aim to expand supplies in the next few years, which could make life difficult for the Organization of the Petroleum Exporting Countries if surging output from outside the group forces OPEC to consider cutbacks.

Baghdad got off to a galloping start this year, ramping up production to 3.4 million barrels per day (bpd) and lifting exports to a record 2.8 million bpd in February, nailing its position as OPEC's second-biggest producer behind Saudi Arabia.

"It's a race for capacity. They may be neck and neck for the next few years, but my money is on Iraq pulling away from a trailing Iran," said Peter Wells of geological consultancy Neftex, who has worked in Iran.

Deteriorating security has reversed early gains, but Iraqi output of around 3.2 million bpd is still up on 2013 and Baghdad is targeting about 4 million by year-end including the autonomous northern Kurdish region.

Iran, more confident after a partial lifting of Western sanctions, has squeezed out more oil to pump 2.8 million bpd. Oil Minister Bijan Zanganeh has vowed to return Tehran to its No. 2 slot as soon as sanctions are fully lifted.

Oil experts say rates could surge to 3.5 million bpd within six months of Tehran being fully unshackled - although the prospects for a final deal between Iran and Western powers may be some way off. Even so, that may not be enough for Iran to overtake Iraq.

"Iran's infrastructure is old but functional. The biggest issues affecting production growth are likely to be bureaucracy and logistics," said a senior oil company source.   Continued...

 
A general view shows the North Rumaila oilfield in the southern city of Basra December 25, 2012.  REUTERS/Atef Hassan