Iraq needs €16.6bn to boost oil production

Pre-war hopes that foreign investment would quickly turn Iraq into a major oil supplier were “too optimistic” and the industry is likely to remain starved of new capital until at least the end of 2005, Britain’s former top envoy to Iraq said today.

Elections scheduled for early next year need to be followed by a more stable security environment before investors get off the sidelines, Jeremy Greenstock told an Asian Oil and Gas Conference in Kuala Lumpur, the Malaysian capital.

Iraq has the potential to more than double current production of 2.5 million barrels of crude per day to reach as many as 6 million, Greenstock said. But Iraq needs as much as €16.6bn in foreign investment in the next few years just to reach four million barrels per day, he said.

“If it were not for the violence, we could be optimistic about Iraq,” said Greenstock, who was Britain’s UN ambassador before becoming the number two administrator in Iraq until he stepped down recently.

“I think security is going to be a problem throughout this transitional period. There will be violence during the elections.”

He noted Iraq has proven reserves at 112 billion barrels of oil, with probable reserves estimated at more than 200 billion barrels.

“Iraq stands second only to Saudi Arabia as a sustained supplier of oil to world markets for the next century,” he said. “But potential investors will watch closely how Iraq develops the industry’s framework.”

He expressed regret that coalition forces had not established security in Iraq more swiftly after last year’s invasion, saying there was “a vacuum in security developments in the weeks after the war was over” that contributed to today’s violence.

But Greenstock downplayed suspicions that Washington wants to control Iraq’s oil industry, and urged the creation of a new national oil company to oversee rebuilding of Iraq’s refineries, which were “old, inflexible and in need of urgent modernisation or replacement.”