IEA: Iraq leads increased medium-term OPEC production capacity

The International Energy Agency, revising upward earlier estimates, said it expects production capacity of members of the Organization of Petroleum Exporting Countries to reach 38.1 million b/d by 2016.

“Crude oil expansion plans in the medium term are moving apace, with capacity now forecast to increase by 2.33 million b/d to 38.1 million b/d by 2016,” IEA said in its latest monthly report.

“Iraq accounts for 80% of the increased capacity, followed by the UAE and Angola,” IEA said, noting that capacity growth is 200,000 b/d higher than its previous forecast for the 2010-16 period.

IEA cautioned that delays to Iranian projects will partly offset the upward revisions to Iraq, where the agency said oil production capacity is forecast to increase by “a sharp 1.87 million b/d, to 4.36 million b/d on average by 2016.”

Aside from Iraq, the only other countries set to contribute significant growth are the UAE, Angola, and Nigeria, which combined will add “a further net 1.3 million b/d by 2016.”

Libya's oil production capacity, disrupted by civil war this year, is expected to rise to 1.15 million b/d in 2012, short of the estimated capacity in 2010 of 1.67 million b/d.

However, IEA said Libyan capacity is expected to continue its rise, reaching 1.61 million b/d in 2014, 1.74 million b/d in 2015, and 1.79 million b/d in 2016.

IEA drew attention to an embargo now being considered by the European Union on nearly 600,000 b/d of Iranian oil imports. That could rise to 1.3 million b/d if other OECD sales are included.

IEA felt it unlikely that a further 1.2 million b/d of Iranian exports, largely to China and India, would be affected.

EU or broader international measures may not be agreed until the end of January 2012, thus allowing operators time to source alternative supplies and coinciding with a seasonal fall in European refiner crude demand in the spring.

However, IEA noted that even a partial ban would nonetheless likely leave Mediterranean refiners “confronting higher prices” for replacement crude from producers such as Saudi Arabia, Iraq, and Russia.

Moreover, IEA said Saudi spare capacity “may not be a precise match” for the significant volumes of Iranian heavy crude involved and that European refiners may face “further competitive pressure” if Asian buyers obtain incremental Iranian cargoes at discounted prices.

But IEA still observed that as a result of tighter US and EU sanctions, Iran’s production capacity “is now forecast to decline by 890,000 b/d to just under 3 million b/d by 2016.”

Meanwhile, IEA reported that OPEC oil supply in November rose to the highest level in more than 3 years, up by 620,000 b/d to 30.68 million b/d. It said Saudi Arabia and Libya accounted for 80% of the monthly increase, with smaller increases posted by Nigeria, Iraq, Kuwait, Iran, Qatar, and the UAE.

In its monthly report, IEA said OPEC’s “effective” spare capacity now stands at 3.16 million b/d compared with 3.58 million b/d in October, explaining that “the lower estimate reflects higher OPEC supplies in November.”

Contact Eric Watkins at [email protected].