Iraq oil exports could fall by as much as 13% next year as maintenance problems and labor shortages
undermine the country's export capacity, a senior Iraqi oil official said Tuesday, in a development that would further frustrate state spending on the country's redevelopment. The Iraqi government has already been forced to slash its 2009 budget by 16% from an original plan of $80 billion because of the collapse in crude prices since July. Next year's $67 billion budget represents about a 4% drop from the 2007 spending framework of $70 billion.
But fewer oil exports would deliver another blow to Iraqi oil revenues, which account for more than 90% of the country's federal budget.
Mussab Hassan Al-Dujayli, head of crude marketing at state-run SOMO, said he expects Iraq's crude exports next year to fall to a level of 1.65 million to 1.8 million barrels a day, down from an average of 1.8 million to 1.9 million barrels a day in 2008.
"Exports will fall. We simply have maintenance problems that will not go away," Al-Dujayli told Dow Jones Newswires on the sidelines of an Iraqi petroleum conference.
A fall from 1.9 million barrels a day in exports this year to 1.65 million barrels a day in 2009 would represent a a 13% drop.
Iraq's oil pumping capacity is also seen falling to around 2.1 million barrels a day from 2.5 million barrels a day two years ago, Al-Dujayli said, noting that natural field declines at many of the country's aging fields were hurting Iraq's production outlook.
Al-Dujayli said the country's dilapidated oil sector couldn't replace old equipment at export and production facilities quickly enough and didn't have sufficient qualified, skilled workers to improve the country's capacity.
He also noted that falling oil prices, down about 67% since a July peak of $147 a barrel, were reducing the government's ability to make new investments in Iraq's oil industry.
Some Iraqi officials have in recent days put the country's production capacity at higher levels, but analysts and foreign companies which have studied the country's geology say Iraq's ability to squeeze out more supply is handcuffed because of insufficient investment.
The country has recently embarked on its first ever oil licensing round and hopes to have contracts signed by June 2009. But even if deals are signed and approved by the Iraqi parliament in that ambitious time frame, major work by foreign companies won't begin until the end of next year at the earliest.
After Saudi Arabia and Iran, Iraq has the world's third largest proven oil reserves, but violence and endless political wrangling since the end of the U.S.-led war in Iraq in 2003 have repeatedly delayed getting those reserves out of the ground.
The outlook for Iraq's crude oil exports and state finances have appeared to force Baghdad to take a more pliable position recently with the autonomous Kurds in northern Iraq.
After months of bitter disagreement with the Kurds over the matter, Baghdad said last week it had reached a "technical" agreement with the Kurds to permit crude produced at two fields in Kurdish territory to be delivered for export through Iraq's main northern Kirkuk pipeline that runs to Turkey's Mediterranean port of Ceyhan.
Permitting supply from those two fields into the Kirkuk line would mean additional oil revenues for Iraq. Volumes of 50,000 to 100,000 barrels a day from the two Kurdish fields into the Kirkuk pipeline are tentatively expected to start in early to mid-2009.