Iraq, Iran form OPEC alliance

There have been speculations that Iran and Iraq are forming a strategic alliance within OPEC. The Financial Times, reporting on the recent OPEC conference in Vienna, even suggested that Iran's allies inside the cartel are trying to win the support of other producers against EU sanctions on Iran's oil industry.

The bid, which was spearheaded by Venezuela, was eventually rejected by key producers such as Saudi Arabia, Nigeria, Libya, and Kuwait. Nevertheless, the issue clearly overshadowed the OPEC talks and was blamed for 'strong disagreements' between members on crucial issues such as production and prices. The

Financial Times quoted unnamed officials as saying that the disagreements showed it would be increasingly difficult to maintain neutrality inside OPEC, as the sanctions issue is reinforcing already deep divisions between Iran, Venezuela, and Algeria on the one side and Saudi Arabia, Kuwait, and the UAE on the other.

It has now become clear that Iraq has joined Iran's camp, whose members are accused of trying to politicise OPEC in favour of Tehran – a position that is expected to bode ill for the crucial cartel.

For more news and expert analysis about Iran, please see Iran Strategic Focus.

© 2012 Menas Associates

Libyan oil output to return to normal by next year

Head of Libya's National Oil Corporation Nuri Berouin has said that the country expects to resume crude oil output to pre-war levers of approximately 1.6 million b/d by 2012. Berouin said that output has arisen to 600,000 b/d, and that he expects further increases of about 200,000 a b/d by the end of 2011.

Speaking about the matter during an economic conference in Qatar, he also said that to repair the oil sector's infrastructure will cost "hundreds of millions of dollars". He explained that Libya's production had reached “600,000 bpd of which 140,000 bpd go to (local) refineries," adding that the remaining 460,000 b/d were for export.

The Libyan revolution saw the country's oil industry virtually shut down. Last week, the Paris-based International Energy Agency said that production in Libya was resuming faster than had been expected after a key pipeline was repaired.

It is estimated that more than 10 per cent of the OPEC member's oil infrastructure was severely damaged during the eight-month rebellion.

Sources: BBC News, WSJ, Business Week

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

KRG criticises Iraq oil law

The semi-autonomous Kurdish government in northern Iraq has criticised a draft of oil law approved by the country's cabinet. The law proposes to centralise control of Iraq's vast oil reserves, which the Kurds think prejudicial.

According to Reuters, the Kurdistan Regional Government (KRG) called on Iraq's parliament to reject the long-awaited law, saying it contradicted the "essence of the constitution".

The new law is key to the OPEC producer's efforts to rebuild after years of war by giving investors more solid legal assurances. It has been in the making for years but has faced opposition over who controls the world's fourth largest oil reserves.

Most of the opposition has come from the KRG, where the government has signed its own contracts with foreign oil companies that the central government in Baghdad deems illegal. The KRG issued a statement accusing Iraq's cabinet of "fooling its members" by reviewing the draft in haste.

The statement said: "In the absence of a federal oil policy for more than six years and unjustified delays in passing the federal oil law...we were caught by surprise by the Cabinet action in approving a draft, in absence of most members, which is totally contradictory to the draft law agreed before."

The cabinet approved the draft in August and sent it to the parliament for ratification. The KRG rejection could hamper efforts to reach a final deal any time soon. The KRG accused Baghdad of breaching political agreements and trying to centralise decision-making.

The statement, added: "The presidency of the Kurdish region denounces this manoeuvre and calls upon the cabinet to withdraw the draft law proposed by the oil ministry immediately, as it contradicts the essence of the constitution…We demand that the parliamentary presidency reject the draft law."

Sources: Upstream Online, Reuters

For more news and expert analysis about Iraq, please see Iraq Focus.

Iran discovers a new onshore natural gas field

Iran's Oil Minister Masoud Mir Kazemi has announced a new onshore natural gas discovery in the country's southern region. The newly discovered oil field is estimated to hold around 9.1 trillion cubic feet of gas and 7.7 million barrels of gas condensate.

The gas field, east of Assalouyeh, is near the South Pars gas complex, and is thought to contain 80 per cent of recoverable reserves which could equate to as much as 7.4 trillion cubic feet of gas.

"The in-situ capacity of the gas field is 260 billion cubic meters and 80 percent of its reserves can be exploited," said Mir Kazemi.

Iran has the world's second-largest natural gas reserves after Russia. Its South Pars field in the Gulf, which it shares with Qatar, holds around 14 trillion cubic metres of gas equal to eight percent of the world's reserves.

In related news, Mir Kazemi held a press conference on Friday 14th January to say that the price of $100 per oil barrel was appropriate and that OPEC did not “need to hold an emergency meeting over the price issue”.

Sources: UPI, Xinhua, AFP, Zawya, Hamsayeh

For more news and expert analysis about Iran, please see Iran Strategic Focus.

Libya discovers three new oil fields

Libya's National Oil Corporation (NOC) has announced the discovery of three new oil fields. The first discovery was made by Turkish Petroleum (TP) working on experimental wells B1-17/3, on Block 147, in the Morzuk Basin in southern Libya. Preliminary tests showed that the first well has the capacity to produce around 265 b/d. Further tests are expected to be carried out in due course.

The other two wells, said to be rich in both oil and gas, were discovered by a consortium of several companies affiliated with the NOC and the Libyan Investment Institution. Libya has estimated oil reserves of 60 billion barrels, and gas reserves in the region of 1,500 billion cubic metres.

In other developments, the head of Libya's OPEC delegation has said that Libya will not increase production if speculation drives oil prices to $100 per barrel, but will look to fundamentals to determine whether the group needs to hike output.

Reiterating his earlier point about output levels head of NOC Dr Shukri Ghanem said, "Once we feel that world demand is increasing and there is not enough supply in the markets in that case we will increase the production."

"There is a lot of oil in the market; there is no shortage, so putting more oil [in the market] would not be prudent," he added.

Source: Africa en ligne, Reuters

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

Diezani Alison-Madueke ready to tackle Nigeria's oil industry reforms

Nigeria's Oil Minister Diezani Alison-Madueke will take her seat as the first female oil minister in OPEC when the group meets in Vienna on 14th October. It is expected that Alison-Madueke will bring to light President Goodluck Jonathan's struggle with international oil companies and insurgent groups whose continued attacks have slowed investment in to the country for the past five years.

Among many of her challenges, one will be to see through the parliament a Petroleum Industry Bill (PIB), already disparaged by international oil companies for giving too much revenue and control to the state. Another is to manage a government plan to hand over 10 per cent of petroleum income to communities in Niger Delta to appease militant groups. Alison-Madueke is also expected to argue Nigeria's case for a larger oil quota, the source of 80 per cent of government revenue.

Talking about her new role she said that it “comes with a great onus of responsibility,” which rests on her shoulders alone. She also said that although OPEC “has done very well over the last 50 years,” the energy sector is changing, particularly its effect on the environment and that it is therefore important to take note of the changes.

As regards Nigeria's OPEC quota, Alison-Madueke said it was set during a particularly turbulent time of militant attacks that had impacted on the country oil production, and added that the quota should be reviewed. Nigeria's official quota is 1.673 million b/d, although it pumped about 2 million b/d last month alone.

Another issue to tackle will be that of implementing the proposed oil and gas law without alienating international oil companies, some of whom have expressed concern that the law would increase taxes making it unprofitable to invest in Nigeria's deepwater fields. As well as that, Nigeria's plan to give a 10 per cent oil and gas stake to Niger Delta communities, in order to reduce hostility toward oil companies, may prove more difficult than initially expected. A spokesman for Movement for the Emancipation of the Niger Delta (MEND) Jomo Gbomo has said that Alison-Madueke is too “elitist” to empathise with the militant cause and that she has no clue as to what the “struggle is all about.”

However, Alison-Madueke is determined to see the plan through and vowed to work closely with the Niger Delta communities to do so. She also said that Nigeria is going to engage international oil companies in “constant discussion” until they “feel part of the bill,” although Nigeria's national interest remains her primary focus.

Source: Bloomberg

For more news and expert analysis about Nigeria, please see Nigeria Focus and Nigeria Politics & Security.