Iraq jostles for power in Opec

DAVID BLAIR | OCTOBER 2010 | SOURCE: FT.com

When Opec’s 12 oil ministers meet in Vienna on Thursday, the veiled rivalry between two of the men at the table promises to alter the club’s balance of power in the years ahead.

Hussain Al-Shahristani, the Iraqi minister, and Masoud Mir-Kazemi, his Iranian counterpart, are playing a unique game of one-upmanship. On October 4, Iraq upgraded the size of its proven oil reserves to 143bn barrels, a 24 per cent rise that placed the country third in the global league after Saudi Arabia and Venezuela.

Most sensitively, Iraq also overtook Iran to become, on paper at least, the second most richly endowed country in the Middle East.

Iraq jostles for power in Opec

But Iraq’s lead lasted only a week. On Monday, Mr Mir-Kazemi responded by upgrading Iran’s reserves to 150.3bn barrels, seizing back his country’s supremacy over Iraq. In practice, the different methods used to calculate and define oil reserves allow considerable leeway to massage the figures.

But this week’s competitive upgrade underlined how Iraq’s steady re-emergence as a major oil player is likely to change the balance of power within Opec over the coming years.

Nothing will threaten the de facto leadership exerted by Ali Naimi, the Saudi oil minister. This week’s meeting is not expected to change output levels because Mr Naimi has made clear that he is content with the current oil price of just over $82 per barrel.

The crucial battle will be over who fills the number two position in terms of production behind Saudi Arabia, a status currently enjoyed by Iran. By itself, Iraq’s possession of large reserves will not be enough to change this.

“Actual production capacity is what counts when it comes to the Iraqi oil minister having muscle for negotiating with other Opec ministers,” says Dr Manouchehr Takin, senior analyst at the Centre for Global Energy Studies. “The potential is there, but converting potential to actual is complicated.”

Reserves are one of the factors used to calculate a country’s production quota.

Iraq produces 2.5m barrels per day, compared with Iran’s 3.7mbd. Mr Shahristani says that Iraq can achieve 12mbd by 2017, a level that would rival Saudi Arabia, but analysts are sceptical.

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