Includes 3 FREE Quarterly Updates.

BMI View: Iraq has the greatest potential for oil production growth in the Middle East region. We forecast over 8mn b/d of crude output by the end of the forecast period, in line with Baghdad’s likely revisions to its ambitious oil production target. There are many downside risks to this outlook, given the slow progress of regulatory reform, security risks to infrastructure and depleting reservoirs. Progress in the natural gas sector is likely to be fitful, with expected production of around 32bcm by 2021.

- BMI sees Iraq crossing the 6mn b/d oil production mark by 2015, with the largest contributions from the giant southern fields such as Rumaila, Zubair and West Qurna-I. Much of this increase depends on the successful execution of the water injection project being led by ExxonMobil.
- Consumption of oil is set to cross 1mn b/d by 2018, predicated on higher demand for refined fuels and growing power needs.
- Iraq’s refining segment will struggle to attract the investment necessary to substantially reduce imports of refined fuels, which we see remaining well above 250,000b/d for the entire forecast period.
- Iraq’s natural gas sector has substantial potential, both through the capture of associated gas (through the Basra Gas joint venture) and through the development of non-associated fields. We see gas output ramping up significantly after 2013, with small exports starting as early as 2015.

Political and security considerations remain paramount, as Iraq’s parliament has yet to pass the longdelayed hydrocarbons and revenue-sharing laws. Proposed reforms to recreate a national oil company and a supreme oil policy-making body remain works in progress.
Iraq’s dependence on oil prices leads to high volatility in the country’s export revenues. Our assumptions of a slower growth in China, a faltering recovery in the US and a worsening eurozone debt crisis clearly pose a threat to global demand. We assume OPEC basket oil prices to fall from US$107.52 per barrel (bbl) in 2011 to US$99.38/bbl in 2012, thus creating a downside risk for the Iraq’s macroeconomic outlook.