IEA optimistic about future of Iraq oil industry

Associated Press Modified: October 9, 2012 at 6:45 am •  Published: October 9, 2012

At the same time, Iraq must complete projects to ensure water is supplied to the oil fields to assist in the extraction process. More oil export facilities also need to be completed.

Increased oil production in Iraq is also crucial for international markets, as Iraq is expected to account for nearly half of the expected growth in global oil output in the current decade, the IEA said.

"Iraq by far makes the largest contribution to global oil production growth," Birol said. "If Iraqi production grows very slowly ... this would put upward pressure on prices."

A more pessimistic IEA forecast sees Iraqi oil output rising to just 4 million barrels a day in 2020 and to 5.3 billion barrels in 2035.

Should the low projection prove to be the more accurate, the IEA said oil prices per barrel could reach nearly $140 in real terms in 2035, nearly $15 a barrel more than under the central scenario.

The report also stressed that Iraq had to meet its own rising electricity demand to avoid the prolonged power cuts still affecting the country. Moving from mostly oil-fueled power generation to gas-fired output would limit domestic oil demand and maximize export revenues.

"Turning the country into a global energy powerhouse will not be an easy task," the report said, "but this is a prize within the reach of the people of Iraq."