CC BY
21
АКТУАЛЬНЫЕ ВОПРОСЫ ХОЗЯЙСТВЕННОЙ ПРАКТИКИ
www.hjournal.ru
Journal of Economic Regulation, 2023, 14(1): 96-103 DOI: 10.17835/2078-5429.2023.14.1.096-103
IRAQI NATIONAL ENERGY STRATEGY FOR OIL AND GAS PRODUCTION: ANALYSIS OF CHALLENGES
TATIANA A. MAKARENYA,
Southern Federal University, Rostov-on-Don, Russia, e-mail: [email protected];
OBAIDI AHMED IBRAHIM HUSSEIN,
Southern Federal University, Rostov-on-Don, Russia, e-mail: [email protected]
Citation: Makarenya T.A., Obaidi Ahmed Ibrahim Hussein (2023). Iraqi national energy strategy for oil and gas production: Analysis of challenges. Journal of Economic Regulation 14(1): 96-103. DOI: 10.17835/20785429.2023.14.1.096-103
In this article, Authors try to analyze to limit the range of points that we will be exposed to within the limits of the possibility of implementing programs productivity and export. The effects of development associated with execution of Iraqi energy strategy. And it will be exposure, in this field, to explain Internal and External Challenges. Internal Challenges classified in two directions. A first one relates to the expected development of the Oil Infrastructure and its adequacy to implement the elements of the production/export strategy. A second one relates to the consequences of Energy policies and public policies in the possibility of achieving economic diversification or not. An External Challenge related to the ability or possibility ofmarketing the quantities of oil to be exportedfrom Iraq in light of the balance Global supply and demand for energy and the role of Iraq in the Petroleum Exporting Countries Organization - OPEC.
Keywords: Iraqi Integrated National Energy Strategy; Energy Sector; Oil & Gas
JEL: L71, N65, O53
НАЦИОНАЛЬНАЯ ЭНЕРГЕТИЧЕСКАЯ СТРАТЕГИЯ ИРАКА ПО ДОБЫЧЕ НЕФТИ И ГАЗА (АНАЛИЗ ВЫЗОВОВ)
МАКАРЕНЯ ТАТЬЯНА АНАТОЛЬЕВНА,
Южный федеральный университет, г. Ростов-на-Дону, Россия, e-mail: [email protected];
АЛИ АЛЬ-УБАЙДИ АХМЕД ИБРАГИМ ХУСЕЙН,
Южный федеральный университет, г. Ростов-на-Дону, Россия,
_e-mail: [email protected]
Цитирование: Makarenya T.A., Obaidi Ahmed Ibrahim Hussein (2023). Iraqi national energy strategy for oil and gas production: Analysis of challenges. Journal of Economic Regulation 14(1): 96-103. DOI: 10.17835/2078-5429.2023.14.1.096-103
© Макареня Т.А., Али Аль-Убайди Ахмед Ибрагим Хусейн, 2023
В этой статье авторы пытаются проанализировать возможности реализации программ производительности и экспорта, последствия развития, связанные с выполнением иракской энергетической стратегии и объяснить внутренние и внешние проблемы реализации этих программ. Внутренние вызовы классифицируются по двум направлениям. Первые относятся к ожидаемому развитию нефтяной инфраструктуры и ее адекватности для реализации элементов стратегии добычи/экспорта. Вторые относятся к последствиям энергетической политики и государственной политики в отношении возможности достижения экономической диверсификации. Внешние вызовы связанны со способностью или возможностью сбыта объемов нефти, которые будут экспортироваться из Ирака, в свете баланса глобального спроса и предложения на энергию и роли Ирака в Организации стран-экспортеров нефти -ОПЕК.
Ключевые слова: Национальная энергетическая стратегия Ирака; энергетический сектор; нефть и газ
1. Problem Statement
Iraqi Strategy for Integrated National Energy involves executive summary and part of its documents have been released since June 2013 on production programs in various energy fields (Crude Oil, Natural Gas, Electricity Power, Refineries stations, Renewable energy, etc. and what results comes from many processes such as Rehabilitating processes, Oil expanding processes and Oil field building infrastructure processes, Pipelines processes. they related to Iraqi Strategy of Energy, Oil export seaports and Oil storage Water supply, Oil power stations, etc. This application implies the need to develop institutional structures represented by structures administrative and follow-up, independent and in the various ministries, and follow development policies that go beyond the energy sector to pour into the path Long-term economy, which includes the next two or three decades. Thus, this strategy can be viewed as unique and important elements of the development strategy in Iraqi energy sector (The World Bank, 2014).
2. Oil and Gas Production Challenges
We can focus on mentioning at the outlook consist of many issues and indicators included A strategy correspond to what was mentioned in a report on We will refer to it in the agency's report — Year 2012. In addition, (Case of Iraq) prepared by the International Energy Agency — IEA in Year 2012 in Year 2017 which was launched close to the launch of the strategy, carries within it numbers — National Development Plan for Year 2013 to Year 2017. Oil production and economic diversification goals until Year 2017. A strategy proposes has three levels (Scenarios) for oil production processes, low level, medium level and high level. The scenarios in the strategy in light of technical/contractual issues, and not for factors related to the economy's financial/foreign currency needs.The high scenario in the strategy was decided in light of the plateau levels. Contractual contracts in oil technical service contracts and plans of the Ministry of Oil for the fields it manages, and appreciation for the implementation of plans (plateaus) in Kurdistan region. The low scenario reflects the lowest possible level of production stemming from a detailed evaluation of the properties Technical and reserves of the various fields and the availability of the necessary equipment. The medium scenario is an intermediate case between the other two scenarios.
Table 1 presents these scenarios as well as production scenarios in the other documents as following (The World Bank, 2014).
We can show that the medium strategy scenario corresponds to the high scenario of the report of International Energy Agency in Year 2012 (which reflects a highly optimistic view of economic development, implementation of policies, and construction/development of structures. Knowing that the Agency's report — Year 2012 raised basic and institutional doubts (but it reduced the course of the plan for Year 2013 Serious about the possibility of implementing the high scenario in it for causes interrelated to the extent of energy strategies and ventures which can be implemented procedures, The risk of interest in the international oil market, on the other hand . So a report is preferred Agency - Year 2012 considered its central scenario because it reflects "an appreciation of the [Feasibility
of Implementing] ongoing and announced policies and projects". It also appears because the report believes that the international market can absorb the production in Iraq, IEA Year (2012), Oil in the Central Scenario.
Table 1
Iraqi Oil production Scenarios (Million Barrels/Day)
Iraqi National Development plan from year 2013 to year 2017 International Energy Agency (report of year 2012 ) Iraqi Strategy for Integrated National Energy Year
high central late high medium low
3.2 3.2 3.2 2012
6.1 5.9 4.2 3.3 9.4 5.2 3.9 2015
9.5 7 4.9 3.6 13 6.9 4 2017
7.7 5.3 3.7 13 7.8 4.4 2018
9.6 6.9 4.4 12 9.2 6 2025
10 7.5 4.8 9.6 9.4 6 2030
10.5 8.3 4.8 9 9.4 6 2035
Source: prepared by Authors.
It was stated in the strategy that a path that falls between the medium and high scenarios is the path of desired. But as a result of the state of the infrastructure. the confidence of some developments in it and in the structure Institutional in the short term. this strategy adopts the middle path. After being rehabilitated in year 2016. Determine which infrastructure and implementation of new investments and institutional reforms will be made possible by year 2015 scenarios will be adopted. From other angles, and in connection with the medium scenario, the strategy shows that investing in year 2030 will amount to 543 Billion Dollars. Knowing that the Agency's report — Year 2012 mentions the same number — the energy sector for the Year 2013, to invest approximately (530 Billion Dollars) in the central scenario in it.
Oil Production Scenarios correspond to three scenarios for gas production associated with oil production. In addition to production Non-associated gas independent of oil production. Under the strategy, a reasonable degree according to the medium scenario, after rehabilitating and expanding the gas processing and transport infrastructure by Year 2015 taking into account domestic needs for dry and liquid gas, there will be a period of gas surplus, between Year 2015 and Year 2030. Available for export. The numbers extracted from the executive summary of the strategy show that between Year 2015 and Year 2030 the need Domestic dry and liquid gas amounts to 4.4 Billion Cubic Feet per Day, while the supplied crude gas In the medium scenario, 6.4 Billion — Feet —Meters — Day, leaving an average surplus of 2.0 Billions-Standard-Meters-Day that could be exported. There are three points that can be made about these indicators. The first point is related to the South Gas Project with Shell/Mitsubishi, although it was not mentioned in the executive summary of the strategy, a detailed document shows that it is part of the projects. Liquid Project Gas - LPG in strategy. It aims to satisfy part of the local market's need for dry and liquid gas condensate and liquid gas. The second point deals with the definition of LNG needs and the export of liquefied natural gas locally. These needs, as mentioned in the strategy. We can be classified it into three sets: the first group it includes liquid gas for the final consumer and dry gas for generating electricity. The second group relates to manufacturing activities that Gas and its products are consumed as raw materials and as fuel, such as petrochemicals, fertilizers, and sponge iron, such as aluminum and others. With the exception of sponge iron, the use of the first two groups justify the primacy of satisfying the local need over export if the rational use of gas is secured.
The use of the third group, giving it precedence over the export should be with at least one verification of two conditions: the first is economic efficiency, and the second is the achievement of large and beneficial forward/backward links for sectoral industrial growth competent. The third point relates
to the gas import deal from Iran, which was concluded in mid-Year 2013, and which was estimated Dry gas was imported by about 0.85 Billions — Feet — Meters — Day until Year 2018. It indicate a condition Temporary precautionary to satisfy the need for gas during the interim period required for execution of necessary infrastructure plans to process and supply gas locally and/or in anticipation of possible delays in its implementation, including a gas project called the South gas project. Iraqi Oil Reserve has reached (141) Billions Barrels in Year 2013. The Proportion of (80%) of Iraq's Oil is still uncertain. So this uncertain reserve is estimated at (360) million barrels.
Iraqi Crude Oil Reserves make up its ratio (10,7%) of Total Crude Oil World Reserves. Iraq has second rank by oil reserves after two countries are neighbors of Iraq (Saudi Arabia kingdom and Islamic republic of Iran). We can summarized Iraq's foreign exchange reserves as following (Petrov, 2019):
Table 2
Iraq's foreign exchange reserves
Year Iraq's foreign exchange reserves
2016 46 billion dollars
2017 49 billion dollars
2018 60 billion dollars
2019 65 billion dollars
2020 48 billion dollars
2021 64 billion dollars
2022 85 billion dollars
Source: prepared by Authors.
Iraqi oil production costs are lowest cost in the world, it is ranging between (0.95 and 1.9) Dollars per Barrel, Compared to the cost of producing a barrel in the North Sea, which reaches ten dollars and in Iraq all types of oil (Light Crude oil, Medium Crude Oil and Heavy Crude Oil). The human element working in the Iraqi Oil Sector is described as among the most efficient in the Middle East1.
Iraq's Conservative Reserves of Oil are estimated at 143 Billion Barrels, Which constitutes the third largest conventional reserves of world Oil after Saudi Arabia kingdom and Islamic Republic of Iran (Tejedor-Estupinan, 2018). Big Parts of Oil Reserves are focused on main seven oil fields: West Qurna and Rumaila, Majnoun, Kirkuk, East Baghdad, Zubair and Bin Omar. All of these fields are located in southern Iraq. Iraq has taken major steps to upturn future production. However, all of Iraq's Oil Sources have not yet been explored, which may far exceed current estimates, to exceed 200 billion barrels.
Iraqi Federal Government has awarded Technical Service Contracts (The World Bank, Iraqi Federal Government, 2012) to several key international oil enterprises in order to change or increase production capacity from twelve large oil fields. Projects of future production from these fields are essentially uncertain, and a range of production profiles so has been carful for planning purposes.
We can show Alternative Oil Production Profiles till Year 2030 as following (The World Bank, Iraqi Federal Government, 2012).
Iraq's ability to export crude oil was limited, with capacity of export by two Million Barrels per Day through the port of Basra and (0.7) Million Barrels Daily through a Pipeline passing through Turkish lands and reaching the Mediterranean Sea, while the strategic oil carrier line between Southern and Northern Iraq and the link between Crude Oil unloading systems in two directions: northern & southern of Iraq. Iraq is marketed light oil products (Kirkuk Crude Oil and Basra light Crude Oil). Heavy Density Crude Oil should be separated from Crude Oil as its production increases.
1 See, for example, Central bank of Iraq. (https://cbiraq.org/SeriesChart.aspx?TseriesID=392 - Access Date: 03.03.2023)
Fig. 1. Alternative Oil Production Profiles Source: Booz & Company analysis.
Authors can show Table 3 about (Key Performance Indicators — Volumes and Production Capacity) for Oil Production and Export Capacity for the Years (2015-2030) (Taghreed and Salman, 2016).
Table 3
Key Performance Indicators - Volumes and Production Capacity) for Oil Production and Export Capacity for the Years (2015-2030)
Key performance indicators Year 2015 Year 2020 Year 2025 Year 2030
Crude Oil Production- Millions Barrels per Day 405 903 903 903
Oil Export Capacity — Millions Barrels per Day 804 10.6 10.6 10.6
South of Iraq 608 608 608 608
North of Iraq 106 308 308 308
Strategic line between south and North of Iraq 0.9 3 3 3
Source: Prepared by Authors.
Authors can be list some of development ways for Iraqi Energy Sector as following2:
1. Economic diversification: by Determining the sensitivity of the Iraqi economy to oil prices in global markets and levels of its production, and the decline in the national economy caused by the dominance of one source of wealth requires developing strategy for energy sector development that would encourage diversification and economic balance in the long term, and expansion of non-GDP. Oil, which includes non-oil energy sectors and other sectors;
2. Achieving the highest level of government revenues: It is achieving the highest level of government revenues through investments connected to energy sector in Iraq;
3. The Iraqi government should take major steps to raise its future oil production: the most important of these steps is to grant a number of major international oil companies (technical service
2 See, for example, Central bank of Iraq, Time Series of data about Oil. (https://cbiraq.org/SeriesChart.aspx?TseriesID=392 — Access Date: 03.03.2023).
contracts) in order to develop (12) huge oil fields and work to increase their production. The future of those fields is an indeterminate matter. There are three cases of Iraqi oil production (13) Millions / Barrels Daily in the Year 2017, (9) Millions / Barrels Daily in the Year 2020, (6) Millions / Barrels Daily in the Year 2035 (Shahnawaz, 2014).
4. Following up and accelerating the execution of the plan to develop extractive oil operations: exclusively in the five oil fields (West Qurna Field / 1 and 2, Rumaila Field, Zubair Field and Majnoon Field), which constitute 75% of the additional production;
5. Accelerate the creation of river or sea water injection station (CSSF): with the possibility of expanding the scope of this project or defining alternative plans in an effort to cover additional fields, and work to ensure that the water from oil wells is properly treated and made available for re-injection;
6. Ensure the establishment of the infrastructure for unloading the oil fields, starting from the wellheads to the main pipelines, on time and in accordance with Iraq's strategy for the separation of crude oil;
7. Expansion of the crude oil unloading system in northern Iraq: the unloading capacity will reach (3.75) Million Barrels Daily by the year 2017, in addition to "rehabilitating and expanding the pipeline extending to Turkey to be able to transport (1.6) Million Barrels Daily, as well as the rehabilitation of the pipeline extending through a follower line passing through Syria, with a capacity of (1.25) Million Barrels Daily. The issue of establishing a pipeline passing through Jordan to Aqaba port in the Red Sea must also be considered, in order to achieve more diversification in the crude transport routes, especially if the Syrian pipeline is not implemented, within the context of crude oil unloading system in northern Iraq, work will be done on Rehabilitation of another pipeline located between two pumping stations ((ITI, K3) to transport (0.7) Million Barrels Daily, which gives a greater degree of flexibility and grants pushing large quantities of oil to the Mediterranean Sea through the Syrian or Turkish lands;
8. Rehabilitating the strategic pipe line linking the north and south and increasing the export capacity on both sides of the line: they will work together to "give Iraq new opportunities" to choose between different markets and export paths. Iraq avoids over-reliance on a single regional market, as the strategy recommends establishing a system that allows Iraq to allocate the bulk of its crude oil to Asian markets with the flexibility to pass up to half of its production through the northern borders of Iraq.
According to the expectations of the International Energy Agency for energy in Iraq, The Total Demand for Natural Gas will increase Significantly, according to the central scenario. The demand is expected to reach Natural gas to 20 Billion Cubic Meters in year 2020, need of Natural Gas expected to reach 70 Billion Cubic Meters.
In Year 2035, it will increase by three times what it was in Year 2020 as a result of increased investments in the field of the gas industry. And it will continue to increase to reach 80 Billions Cubic Meters by year 2040. According to Data of the International Business Monitor non-associated gas production in Iraq should increase to 7 Billion Cubic Meters by Year 2020, with the start of the development of Miran / Bawi gas field in Kurdistan (Northern of Iraq).
Iraqi Oil Production will be increased at first quarter of Year 2025 by 10 Billion Cubic Meters, while Dry Natural Gas is expected to consume in Electric power generation stations (Shahnawaz, 2014). Most of gas stations will be converted from electric owner stations to Oil projects related to Natural Gas Power Projects. It will open the way for gas to enter natural resources to local consumption, improving energy production efficiency and converting a large part of the oil to export. While it indicated in its report for the year 2015 that the Basra Gas Company is a pivotal link in the chain, it aims to collect, process and Market Gas Associated with Oil Production from the giant fields in Southern Iraq (Rumaila, West Qurna and Zubair). Despite the urgent need to improve energy supplies, Most of the Gas produced is in 6 Billion Cubic Meters) Annually, or only a Third — Southern of Iraq still burning, with a processing capacity of about 5-6 Millions Feet of Gas associated with the production process. It will also take some time to build up a domestic gas consumption base within the Strip. Energy and beyond, although the agreement to build a petrochemical complex in which costs11 Billion Dollars,
near Basra, Will help anchor regional infrastructure development. So you expect company 5.8 Billion Cubic Meters — Oxen Mobile Enterprise that a large part of the Dry Gas generation stations consume more than 5 Million cubic feet in year 2025, which would insinuate 4,000 Megawatts of electric power.
Iraqi gas industry suffers from many problems, such as obsolescence of the advanced technology which used in its origin. It also introduced the carriers of natural gas, which cause surplus of large capacities of Natural Gas, as well as the problems of financial fraud and the lack of security permanence caused to destruction and destruction of many established from refineries stations and pipelines. Foreign companies investing through licensing contracts and the Basra Gas Company will have a prominent role in exploiting associated and free Natural Gas and using it according to the Iraqi Laws in preserving Hydrocarbon wealth, which will inevitably help change the unilateral export pattern and restructure the energy balance in Iraq
3. Conclusions & Recommendations
Authors can be summarized a framework of studied Strategy. It includes main tools by upstream and downstream Oil Production processes, natural gas processes, electric power processes, and related industrial processes. These recommendations show reflect of Economic results of Iraqi strategy that deals with mechanisms and market share impacted on Iraq's socio-economic and environmental results. This strategy began from year 2015 to year 2030 (The World Bank, Iraqi Federal Government, 2012). Iraq able to be richest supplies for crude oil and natural gas in the world. Foreign investments can be able to be more productive and continually growing economy. Iraq will be need a strategic vision in two dimensions: First of them is Economic efforts, linking resource allocation and capital investments. Second of them is institutional efforts, involving responsibilities, capabilities, E-government, and industry structure. A multiple institutions must be work together to achieve purposes of an Iraqi Strategy. An Economic roadmap is a shared agenda. Because this agenda can be skilled by successful management of a large number of energy enterprises, related tasks, strong official roles and capabilities and so on. Iraqi Strategy recognizes need for economic development and institutional development (The World Bank, Iraqi Federal Government, 2012). Authors can show following conclusions:
1. Iraqi oil sector is the main source for supplying enough money to cover Iraqi needs to be able to build development plans to cover its needs for imported goods & services. the needs of the governmental sectors for raw materials and the rest of the desires to oil national production;
2. Increasing the pumping of Iraqi oil abroad leads to an increase in its revenues from hard currency, and this in turn leads to achieving steady growth in the process of comprehensive economic development;
3. Iraq's great potential emerged by facing the difficulties and problems it faced throughout the time of the past four wars;
4. Iraq's economy linked to performance of energy sector, it suffered over the past forty years from intermittent wars, struggles and international sanctions. Today, Iraq suffers from a deteriorating infrastructure. The necessary infrastructure benefit from these sources, related industries based on these sources are almost non-existent, in addition to the chronic inability to meet the local demand for electric power. According to role of Oil Sector in the Iraqi Economic Development Process as a positive feedback on other sectors (economic, industrial, and agricultural) as well as on social aspects - such as health, education, etc. Authors suggest some recommendations to develop Energy Sector of Iraq (International Bank for Reconstruction and Development, 2014)3,4:
1. Continues to develop for Energy sector in Iraq through interdependent, coherent, sustainable and environmentally friendly mechanisms;
2. Iraqi Ministry of Oil should be establishing a working group to improve Crude Oil resources, as well as a unified team for institutional reform deals with oil and gas;
3. Refining standards of live by check the sustainable development indicators. Because of Iraq emerging from conflicts and emergencies, it will need to build a new strategy of investment in
3 See for example, system guarantee. (http://ivo.garant.ru/#/document/77211615 - Access Date: 05.03.2023)
4 See for example. (https://www.unido.org/sites/default/files/files/2020-07/ASIA%2BPACIFIC%2520Book.pdf - Access Date: 04.03.2023)
infrastructure, education, industry, health, and the energy sector they must not only provide the financial resources necessary for this investment, but also by electricity fuel and nutritious raw materials necessary to maintain economic activity and improve the level of personal well-being for all Iraqis;
4. Iraq can develop the manufacturing sector, agriculture, and services within a relatively short period, "but the current development obstacles are great, including: financial and administrative corruption that is rampant in economy sectors. An absence of a clear and sober economic policy, as well as" the state of security and political instability in which the country is experiencing. Iraq could not reduce its dependence on oil. Iraq's economy is therefore unilateral and unilaterally dependent "totally" on its oil sector.
СПИСОК ЛИТЕРАТУРЫ/REFERENCES
Петров Д.Н (2019). Современные тенденции развития рынка сжиженного природного газа. Томск, [Petrov, D.N. (2019). Current trends in the development of the liquefied natural gas market. (https://core.ac.uk/download/196226425.pdf - Access Date: 06.03.2023( (In Russian).]
Al-Asadi, Amjad, S., Dwaya, A. (2015). The future of the energy sector in Iraq in light of the energy strategy for the period (2012-2030). University of Basrah Basrah and Arab Gulf Studies Center 33(33): 1-50. (https://search.emarefa.net/ar/detail/BIM-812015)
Al-Bayan Center for Planning and Studies (2018). Towards a strategic vision for sustainable development for the year 2030 in Iraq. Baghdad. (https://www.bayancenter.org/2018/01/4205/)
Ali, M. (2022). Aspects of Oil and Gas: Energy Policies and Strategy in Iraq 2003-2022. Iraqi Economists Network. (http://iraqieconomists.net/ar/2022/12/03)
BP. (2020). Statistical Review of World Energy 2020, Issue No. 69.
Hashem, M.K. (2022). The legal system of foreign companies and investment in Iraq. PhD thesis in private law. Beirut: Islamic University of Lebanon.
International Bank for Reconstruction and Development (2014). Public Expenditure Review: Toward More Efficient Spending for Better Service Delivery.
Shahnawaz, A. (2014). Performance and Prospects of Indo Iraq Economic Cooperation in the Post Saddam Era. (https://shodhganga.inflibnet.ac.in:8443/jspui/handle/10603/70447)
Taghreed, D., Salman, D. (2016). The impact of oil revenues on the development of the Iraqi economy. Journal of University of Babylon 24(4): 1034-1063.
Tejedor-Estupinan, J.M. (2018). Oil, development and conflict in Iraq: An introduction. Koz-gazdasag-Review of Economic Theory and Policy 13(3): 141-157.
The World Bank. (2014). Developing a National Energy Strategy in Iraq. Washington, D.C.: World Bank Group. (https://www.worldbank.org/en/results/2014/04/15/developing-a-national-energy-strategy-the-iraq-experience - Access Date: 06.02.2023)
The World Bank, Iraqi Federal Government. (2012). Integrated National Energy Strategy (INES): final report (English). Washington, D.C.: World Bank Group. (http://documents.worldbank.org/curated/ en/406941467995791680/Integrated-National-Energy-Strategy-INES-final-report_)
