© OECD/IEA 2012

9 October, London

© OECD/IEA 2012

Iraq: the energy context

Oil & natural gas resources are immense & the costs of production are among the lowest in the world

Already the world’s 3rd largest oil exporter, with plans to expand oil & natural gas production rapidly

Natural gas is an under-utilised resource – more than half of the natural gas produced is flared

Catching up & keeping pace with rising demand for electricity is critical to national development

Energy infrastructure & institutions, while improving, continue to be a serious constraint:

Legacy of damage & poor maintenance

Lack of consensus on governance of the hydrocarbons sector

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Oil is the cornerstone of Iraq’s economy

GDP, share of oil export revenues, population in 2011

Twin challenges for Iraq are to increase its oil revenues & then to use them to support greater diversification of its economy

Iraq Kuwait Iran Saudi Arabia

GDP

72% 55%

Oil export revenues

52% 24%

31 million 3 million 75 million 28 million

$115 billion $177 billion

$482 billion $578 billion

Population

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Oil is poised for a major expansion

Iraq oil production

Production more than doubles by 2020 & reaches more than 8 mb/d by 2035, with Iraq becoming a major supplier to Asian markets, especially to China & India

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2

3

4

5

6

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8

9

2012 2020 2035

mb/d North

Centre

South

Iraq oil exports

1

2

3

4

5

6

7

8

9

2012 2020 2035

mb/d Other

Asia

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What will determine the pace of growth?

Political consensus on oil governance & legal framework

Speed & coordination of investment along the supply chain

Avoiding bottlenecks in storage & transportation

Sufficient water to support oil production

Drilling rigs & expertise

Iraq’s long-term oil & natural gas development strategy

Our High Case of 9 mb/d by 2020 would equal the highest sustained growth in the history of the oil industry

International market conditions

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Iraq leads global oil production growth

Growth in oil production, 2011-2035

Iraq accounts for 45% of the growth in global production to 2035; by the 2030s it becomes the second-largest global oil exporter, overtaking Russia

Iraq 45%

Rest of OPEC 42%

Non-OPEC 12%

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Iraq takes its place on the global gas map

Growth in key natural gas producers, 2011-2035

Iraq can potentially provide a very cost-competitive gas supply by pipeline to neighbouring countries or to Europe and – via liquefied natural gas – to Asia

50 100 150 200 250

Algeria

Brazil

Iran

Qatar

Iraq

Turkmenistan

Australia

United States

Russia

China

bcm

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Gas moves from sideshow to centre stage

Iraq’s natural gas balance

Reductions in gas flaring & development of new gas fields will be needed to meet Iraq’s growing domestic needs & its export ambitions

20

40

60

80

100

2010 2015 2020 2025 2030 2035

bcm Production

Demand

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Catching up with power demand

Oil helps to eliminate the power deficit in 2015. But without a longer-term shift to gas-fired power, Iraq would forego more than $500 billion in oil export revenue

Iraq electricity generation

50

100

150

200

250

300

2010 2015 2020 2025 2030 2035

TWh Shortfall in generation

Hydro & other renewables

Natural gas

Oil

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A chance to transform Iraq’s prospects

Iraq annual oil and natural gas revenues

$5 trillion in cumulative export receipts is 10% of all revenues from global oil trade; Iraq’s GDP in 2035 rises to the level of Saudi Arabia today

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100

150

200

250

300

350

2012 2020 2035

Billion dollars (2011)

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A step-change in energy investment

Iraq annual average requirement for energy investment

The overall investment bill of $530 billion is 10% of oil export revenues, but annual spending needs to increase quickly over the current decade

5

10

15

20

25

30

2011 2012-2020 2021-2035

Billion dollars (2011)

Electricity

Natural gas

Oil

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Delay would come at a high price

If investment & oil production growth is delayed then global oil markets tighten, with prices $15 higher in 2035, & Iraq’s cumulative GDP would be $3 trillion lower

Iraq oil production profiles

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8

10

2000 2005 2010 2015 2020 2025 2030 2035

mb/d

Central Scenario

Delayed Case

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Iraq’s transformation has global implications

With 45% of the anticipated growth in global production to 2035, Iraq is key to the long-term outlook for oil markets

Successful oil & gas development requires a shared vision for the sector & efforts to coordinate investment all along the supply chain

Delay would come at a high cost to Iraq and to international markets

Productive use of natural gas is critical to a healthy domestic balance

Oil export revenues can provide the foundations for a modern and prosperous Iraqi economy