I would note with my respects to Mr. Norman that the latest figures I remember reading indicated that Saudi Arabia's fiscal planning required a price of $100/bbl and Iran and Venezuela were in excess of $105/bbl with Iran closer to $107/bbl. Iraq on the other hand is probably quite a bit lower than that and consequently right now I would expect that they are pulling in a lot of cash, which they need ever penny of. Speaking of which a quick check of the news shows that Iraq is yet again setting production and export records, here is the
AP story as carried by ABC News:
Iraq's daily oil exports surged to 2.8 million barrels per day in February, some half million barrels more than in the previous month, as international oil companies developed fields and export infrastructure, a senior official said on Saturday.
...
The country's deputy prime minister for energy, Hussain al-Shahristani, also said Saturday in the southern of Basra that average production, including the exports, exceeded 3.5 million barrels per day last month. He described the figures as "unprecedented."
He said the daily production would have reached 4 million barrels if the country's northern self-ruled Kurdish region had contributed its share of about 400,000 barrels a day to the figure, as had been estimated in the 2014 budget. The Kurds, who stopped exporting oil more than a year ago over a payment row, have sought greater control over oil in their crude-rich region, while Baghdad argues that it should be under central government control.
Turkish newspaper
Hürriyet which is affliated with
Doğan News Agency also has an
article that meshes well with the AP material reported by ABC News:
Iraq exported 2.8 million barrels of oil per day in February, a top minister said Saturday, a sharp month-on-month gain and the highest such figure in at least a quarter-century.
...
The export figure was the highest since then dictator Saddam Hussein invaded Kuwait in 1990, triggering a crippling embargo and international sanctions that massively restricted Iraq's energy industry.
In 2012, when average daily exports reached 2.5 million barrels per day, the oil ministry said it was the highest such figure since 1989.
The good news here is that the Iraqis are pouring oil onto the world markets in ever increasing quantities. This helps keep prices stable in the long run and limits the extreme upside potential for oil prices as the market is well supplied. Stagnant domestic U.S. demand coupled with surging U.S. production and exports of distillates puts significant downward pressure on West African and Venezuelan crude prices also further easing pressures on the Brent global benchmark. All of this is occurring as both Syrian and Iranian exports are significantly curtailed. For the moment Russian exports remain uninterrupted although the outlook there remains highly uncertain.
The other clear implication of the story is that there were something in the range of 500K/daily bbl of exports of capacity that were witheld due to the disputes with the Kurds. This would imply that export figures for March will rise very significantly as an agreement now appears to be in place regarding this issue. All of this is to say that Iraq is going to be in a better position going forward this year to take better care of its people, develop its infrastructure and improve its economy. That is a very significant development for the Middle East and will likely have stabilizing effects on the conflicts in that area. Why fight when there's money to be made?
On another development front which I consider to be completely under reported in domestic media the Afghan government has signed concessions for exploration and development of potential oil resources in the generally peaceful northern tier of the country next to Uzbekistan and Turkmenistan. Here is the best
article I found:
Dragon chief executive Abdul Jaleel Al Khalifa says Dragon Oil will continue to reward shareholders with dividend growth. But, he also confirmed much of the group’s US$2bn cash pot is earmarked for investment, with new work programmes getting underway this year. “We will definitely pay for the existing expansion and exploration targets,” he said in a Proactive Investors interview. “This year we’re going to sidetrack the well in Tunisia, we’re going to drill a well in Iraq, we’ll drill a well in the Philippines. We’ll also seismic acquisition in Afghanistan, Iraq and Egypt.”
Afghanistan has a
history of gas production in the north mainly in
Jowzjan Province and especially around
Sheberghan. While the volumes produced are not large the effect is magnified by the fact that Afghanistan remains a net importer of liquid hydrocarbons and energy in general. Increased production in this area will result in an improved economy, lower energy costs and additional products that will be available on the world market displaced by domestic Afghan production. The potential upside to estimated reserves in Afghanistan is very significant as exploration to date has been thin.
Returning to the topic at hand, all of this is to say that the prices supporting North Dakota's current production levels should remain stable for a very long time. Although production increases onto the global market will eventually push prices down for the moment the geo political situation isn't sufficiently calm enough to allow Brent to go below $90 (or perhaps even $95). The net effect on rail is significant as this bodes for major traffic increases to Crude by Rail for a long time to come, tank car replacement not withstanding. Another angle to look at is also the effect on the Class I physical plant in the northern transcontinental tier. I keep waiting to see how much more track mileage BNSF is forced to reopen across the northern Plains. Although I don't think we will see train running again through
Homestake Pass I am left wondering about this possibility as oil production continues to challenge BNSF's available capacity.
