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Oil in a Week –The Increase of Iraq's Oil Reserves: Timing and Credibility
Published in AL HAYAT on 10 - 10 - 2010

In a press conference held at the Oil Ministry in Baghdad a few days ago, the Iraqi Oil Minister Hussain al-Shahristani announced the increase of Iraqi oil reserves by about 28 billion barrels, from 115 billion barrels to 143 billion barrels or 25 percent. Al-Shahristani attributed the majority of this increase to the reevaluation of oil reserves in two giant fields in the south of the country, namely, the West Qurna and Zubair fields. The minister pointed out that the new estimates of the reserves are the result of a three-dimensional seismic survey carried out by international oil companies, in accordance with the agreements they had signed with Iraq.
It should be noted that the figures related to Iraq's oil reserves, and also the figures on the reserves of the majority of other OPEC member states, are usually surrounded by much secrecy and political considerations. In what regards Iraq in particular, the Iraq Petroleum Company (IPC), which was run by a group of foreign international companies, had for a long time concealed the figures on the Iraqi oil reserves, in an attempt to reduce Iraqi production for the benefit of neighboring countries. The declared figures on Iraqi reserves continued to be less than the actual figures after nationalization in the seventies and until the eighties, as a result of the secrecy policy regarding the state's economic information at the time.
There are certain conventional methods followed in announcing the volume of a given country's reserves: Either the reserve figures of the previous year are announced during the first two months of the new year, or the names of newly discovered fields are mentioned along with the annual reserve figure.
With regard to Iraq, the process of increasing reserve figures is done by reevaluating the available oil in the known fields, as a result of exploring new productive layers or more accurately assessing the field's actual reserve contents. More importantly, in order to ensure credibility at the level of the international oil industry, the results of seismic surveys must be announced in a timely fashion when making new discoveries and results in the reevaluation of old fields. Without following up this process with such steps, many questions and suspicions regarding the credibility of declared figures arise, and as a result, the desired objectives behind these figures are lost.
It is very difficult for a country like Iraq, which opened its oil sector to international companies, to conceal or manipulate the figures related to its oil reserves, particularly when international companies themselves are surveying the oil fields one by one, and hence, have a thorough knowledge of what is being indeed declared or otherwise concealed.
There are no doubts among oil experts regarding the magnitude of Iraq's oil reserves, which they reckon are much higher than the previous declared figure of 115 billion barrels (2001).
But the question that has to be asked here is: Why has this announcement been made at this time, while the Iraqi government to come is still in the process of formation, after nearly eight months of fruitless attempts? This question comes amid other questions regarding the completion of the international companies' three-dimensional seismic surveys of the two main giant fields (The West Qurna - phase I and II- and Zubair fields), mentioned by the Oil minister in his press conference. This is because the information publicly available about these fields indicates that seismic surveys have not started in certain cases, or are still in their initial stages, or in other words, the data has not been assessed and analyzed as is usually the case.
Why then this rush to publish the figures on the new Iraqi oil reserves then? It is certain that the issue of Iraq's production quota will not be discussed during OPEC's ministerial meeting on October 14. It is still early to discuss this issue. Therefore, it is not in the interests of Iraq to put this issue on the organization's agenda at present, when Iraqi oil production is still at the 2.5 million barrels per day level (i.e. much less than the old suspended quota allocated to Iraq). This is while noting that the determination of an OPEC member state's production quota does not solely rely on the volume of its reserves, but also takes into account many other factors.
The biggest problem in Iraq, however, is the absence of a social contract among the citizens regarding the nature of the desired political system, not to mention the abnormal new norm in the wake of the U.S occupation since 2003 in allowing neighboring countries to interfere in the internal and sovereign affairs of the country while undermining its internal security in the service of these countries' interests. In this regard, Iran has played a major role, through its support for many militias. Also, its interference has destabilized the internal state of affairs, and increased the sharpness and frequency of polarizations within the country. Currently, it is feared that this policy will continue to weaken the country's economy in the future, especially the oil sector, as is the case today in what regards the political scene.
*Mr. Khadduri is an energy expert


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