Iraq Energy Outlook Special Report

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© OECD/IEA 2012

Oil is the cornerstone of Iraq’s economy GDP, share of oil export revenues, population in 2011 $578 billion $482 billion $177 billion $115 billion GDP Oil export revenues 72% 55% 24% 52% Iraq Kuwait Iran Saudi Arabia 31 million 3 million 75 million 28 million Population Twin challenges for Iraq are to increase its oil revenues & then to use them to support greater diversification of its economy© OECD/IEA 2012

Oil is poised for a major expansion Iraq oil production Iraq oil exports mb/d 9 mb/d 9 Other North 8 Centre 8 Asia 7 South 7 6 6 5 5 4 4 3 3 2 2 1 1 2012 2020 2035 2012 2020 2035 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© OECD/IEA 2012

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© OECD/IEA 2012

Iraq leads global oil production growth Growth in oil production, 2011-2035 Non-OPEC 12% Iraq 45% Rest of OPEC 42% 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© OECD/IEA 2012

Iraq takes its place on the global gas map Growth in key natural gas producers, 2011-2035 China Russia United States Australia Turkmenistan Iraq Qatar Iran Brazil Algeria 50 100 150 200 250 bcm 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© OECD/IEA 2012

Gas moves from sideshow to centre stage Iraq’s natural gas balance bcm 100 Production 80 Demand 60 40 20 2010 2015 2020 2025 2030 2035 Reductions in gas flaring & development of new gas fields will be needed to meet Iraq’s growing domestic needs & its export ambitions© OECD/IEA 2012

Catching up with power demand Iraq electricity generation TWh 300 Shortfall in generation 250 Hydro & other renewables Natural gas 200 Oil 150 100 50 2010 2015 2020 2025 2030 2035 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© OECD/IEA 2012

A chance to transform Iraq’s prospects Iraq annual oil and natural gas revenues Billion dollars 350 (2011) 300 250 200 150 100 50 2012 2020 2035 $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© OECD/IEA 2012

A step-change in energy investment Iraq annual average requirement for energy investment Billion dollars 30 (2011) Natural gas 25 Electricity Oil 20 15 10 5 2011 2012-2020 2021-2035 The overall investment bill of $530 billion is 10% of oil export revenues, but annual spending needs to increase quickly over the current decade© OECD/IEA 2012

Delay would come at a high price Iraq oil production profiles mb/d 10 Central Scenario 8 6 Delayed Case 4 2 2000 2005 2010 2015 2020 2025 2030 2035 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© OECD/IEA 2012

Iraq’s transformationhas 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© OECD/IEA 2012

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Iraq Energy Outlook Special Report

by International Energy Agency on Oct 10, 2012

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