Oil Growth Story in Iraq Loses Steam

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One of the most significant global oil production growth drivers has been derailed. Upstream development in Iraq has lost pace bluntly evidenced by the resignation of the Iraqi Oil Minister, Abdul-Mahdi, in March 2016.  Previously the vice president of the country for 6 years, Abdul-Mahdi had been the oil minister for almost 2 years.  The Iraqi Oil Ministry proposed a target of 12 mmbd in 2009, which was then followed by a reduced target of 9 mmbd in 2013.  In 2015, Abdul-Mahdi, announced a revised crude production target of 6 mmbd by 2020.  Current production hovers around 4.3 mmbd, while GlobalData forecasts closer to 5 mmbd by 2020.  Budgetary constraints caused by low oil prices, political disputes, and a prolonged conflict with ISIS have impacted the government’s ability to maintain the tremendous levels of capital investment required to realize targeted production levels, despite the country’s wealth of resource.  While the Iraq government has signaled it’s open to freezing production along with other OPEC members to boost oil prices, it would be challenged to continue growing production in the short term regardless of a freeze.

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