Russia took control of the oil sector of the semi-autonomous region of Kurdistan (KRI) in northern Iraq in 2017 for four key reasons, as analysed in depth in my new book on the new global oil market order. First, the KRI has significant oil and gas reserves. Second, its troublesome relationship with southern Iraq, governed out of Baghdad, would allow Russia to play the role of mediator between the two parts of the country, giving it leverage over both sides. Third, this leverage could then be used to extend Russia’s grip over southern Iraq too, which has even more oil and gas reserves. And fourth, it would enable Russia to stymie any efforts by the U.S. and its allies to begin to rebuild their influence in the country. This last point found further resonance after March’s resumption of relationship agreement between Iran (Iraq’s chief regional sponsor) and Saudi Arabia, brokered by China. Specifically, a source who works closely with the European Union’s energy security apparatus exclusively told OilPrice.com at the time, Iran was told by a very high-ranking official from the Kremlin that: “By keeping the West out of energy deals in Iraq – and closer to the new Iran-Saudi axis - the end of Western hegemony in the Middle East will become the decisive chapter in the West’s final demise”.
With the future of independent oil supplies from the KRI looking highly precarious, Russia is moving firmly into the last phases of its plan for Iraq, as highlighted by serious discussions over the past two weeks for it to increase its presence in the country’s oil fields. A litmus test for both sides in this respect is Russia finally effecting a major increase in oil production from Iraq’s supergiant West Qurna 2 oil field. This field – along with the supergiant Rumaila – was cited recently by Iraq’s Oil Ministry as being vital to the country’s plan to increase its oil production capacity to around 7 million barrels per day (bpd) in 2027. The entire West Qurna oil field, located 65 kilometres northwest of the southern port city of Basra, has total estimated recoverable oil reserves of 43 billion barrels – making it one of the very biggest oil fields in the world. West Qurna 2 has estimated recoverable oil reserves of around 13 billion barrels and, like most of the big fields in Iraq (and Iran, and Saudi Arabia), it benefits from the lowest lifting costs in the world – at just US$1-2 per barrel. The original development plan for the West Qurna 2 field was to produce 1.8 million bpd but this was amended in 2013 to a three-stage plan in which peak production would be 1.2 million bpd. Phase 1 would add around 120,000 barrels per day (bpd) to the early 30,000 bpd of production from the site’s Mishrif Formation. Phase 2 would add another 400,000 bpd from the full development of the Mishrif Formation. And Phase 3 would add another 650,000 bpd from the development of the deeper Yamama Formation.
By Simon Watkins for Oilprice.com