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Following Iraq's invasion of Kuwait and the embargo on Iraqi oil exports, Iraqi oil production fell to around 300,000 bbl/d from 3.5 MMBD in July 1990. Through the first half of 2000, Iraqi crude oil production averaged 2.5 MMBD (in August 2000, production reached approximately 3 MMBD). About 450,000-500,000 bbl/d of Iraq's oil output is consumed domestically, with another 70,000-90,000 bbl/d trucked to Jordan under a special UN exemption, leaving around 2 MMBD for export. Smuggling to the UAE may have accounted for 70,000 bbl/d. Iraqi officials had hoped to increase the country's oil production to 3.4 MMBD by the end of 2000, but now appear to be acknowledging that this is probably not realistic, given technical problems with Iraqi oil fields, export terminals, pipelines, and other oil infrastructure. Industry experts generally assess Iraq's sustainable production capacity at no higher than 2.9-3.0 MMBD, and more likely closer to 2.6 MMBD (with net exports of around 2.0 MMBD). Iraq's battle with "water cut" is a major challenge, especially in the south. In October 1999, oil consulting firm Saybolt International reported that Iraq has been able to increase its oil production through use of short-term techniques not generally considered acceptable in the oil industry. The economics of oil prices are about as accurate as "spot the ball". OPEC will certainly not tolerate a long term increase in Iraq's production above 1990 levels. A large increase in the price makes it more attractive to explore and develop new fields which otherwise would be uneconomic. It also reduces oil consumption. A significant drop in price has the reverse effect. Significant in the next decade will be pressure to cut carbon emissions balanced against developing world's increasing energy needs and a continuing growth in world population. Fuel cell and other renewable energy supply will also play a role. Saudi Arabia would love to see prices stabilise at their present levels, but this probably remains wishful thinking. Assuming Iraq can earn net profit of about US$ 20 per bbl on an average 2 million bbls pd, the figure of US$ 16 billion annually is not a bad estimate. However, the significant difference between Iraq and other countries such as Saudi Arabia is that Iraq spent much of its income on fireworks between 1980 and 1990 and therefore was already lagging behind in the sophisticated downstream investment and related industrial development. Sanctions since 1990 have destroyed any prospect of Iraq building an equivalent industrial infrastructure in the last 10 years. The real loss to Iraq is therefore much greater than the simple calculation based on crude oil sales. For example, the petroleum industry has contributed an average of 75% of government revenues and more than 90% of export receipts in Saudi Arabia since 1992, but only 40% of GDP. Balance the figures for Iraqi oil production receipts against a claimed US$ 130 billion in outstanding foreign debt, and war reparations claims well in excess of US$ 100 billion. The only conclusion is that something has to give somewhere. Greetings, Mark Galloway -- ----------------------------------------------------------------------- This is a discussion list run by the Campaign Against Sanctions on Iraq For removal from list, email soc-casi-discuss-request@lists.cam.ac.uk Full details of CASI's various lists can be found on the CASI website: http://www.casi.org.uk