THE OUTLOOKYear-end analysis from Iraq Bureau Chief Ben Lando
As this country enters a seventh year of reconstruction, basic services are still floundering. A mid-December thunderstorm turned the floors of many Baghdadi homes into sewage cellars. Electrical grids swooned. Unemployment remains. Security has stabilized, but lives are still rent by regular violence.
In light of such volatility, Iraq’s leaders and investors alike would do well to take a cue from Iraqis, who persevere by keeping their eyes open to the dangers around them while also finding reasons to hope.
In that spirit, Iraq Oil Report continues to deliver news of both the great challenges and the opportunities in this country. Our year-end roundup highlights some of our best stories from 2010 - articles which not only tell our readers what has happened, but also help them plan for an uncertain future.
The Oil Ministry now plans to achieve more than 13 million barrels per day (bpd) of oil production capacity within seven years, on backs of the 11 new oil contracts. Next year’s export schedule calls for 2.3 million bpd, up from less than 2 million bpd in 2010. The new budget even counts on 150,000 bpd of exports from Iraqi Kurdistan, a sign of Baghdad’s hope that tensions, which have effectively locked in the lion’s share of Kurdish exports, are easing.
As I write, I’m sitting at a formative meeting of the International Business Council of Iraq. More than 60 people are here, representing businesses from Iraq, the US, UK, Czech Republic, and Romania, plus American embassy and coalition military officials, members of the clergy and the symphony, security companies and NGOs. Such collaboration and development will be a deciding factor in the future of Iraq and the quality of life for its citizens.
Iraq’s economy depends on optimism to the same degree it depends on investment. Successful investment, however, also relies on a sober assessment of the challenges ahead. Those hurdles range in size and shape – from the limitations of Iraqi institutions and infrastructure, to the volatility of domestic politics and security, to the geopolitics of oil.
Foreign oil companies made their first contractual footprint, but now complain of bureaucratic delays. A Transportation Ministry conference for the Oil Ministry and IOCs, designed to smooth out such wrinkles, has been postponed twice, now until mid-January.
Prominent Iraqi government officials who helped orchestrate the new oil contracts have also raised doubts that the international market can absorb such a dramatic jump in supply less than a decade from now.
Even if worldwide demand rises to support such production, Iraq will be hard pressed to reach itsproduction goals. The country still needs to address existing bottlenecks, relieve weary pipelines, and increase refining and storage capacity just to handle its current output – which is one-fifth of the production Iraq will see if foreign oil companies make good on their contracts.
Yet in a sign of rare organized forward planning, contracts have been signed that put on schedule an annual southern export capacity increase for each of the next 4 years. A new drag-reducing agent will be used to increase pipeline flow without increasing pressure on the worn lines next year – the only real way to get beyond today’s current national 2.1 million bpd export capacity limits in the short term.
Violence has dropped over the last few years, and has leveled off. The country suffers small attacks every day, many a result of organized crime rather than ideological insurgency. Yet an isolated minority still seeks to undercut Iraq’s institutions and sow division, targeting government buildings and officials, security forces, and religious and ethnic rivals.
In addition to the grief of daily bloodshed, average Iraqis still suffer the frustration of their elected leaders’ political gamesmanship. Parliamentarians, earning in excess of $10,000 a month since being sworn in shortly after the March 7 election, took until November to start forming a new government.
The parties in the acrimonious governing coalition will continue to jockey for dozens of ministerial, deputy and other power posts into the new year - a fractious democracy at work, and good cause for both anxiety and hope.
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