© OECD/IEA 2012

April 9, Paris – Energy Training Week

© OECD/IEA 2012

Iraq main hydrocarbon basins and fields

© OECD/IEA 2012

Iraq: the energy context

Oil & natural gas resources are immense & the costs of production are among the lowest in the world

Already the world’s 3rd largest oil exporter, with plans to expand oil & natural gas production rapidly

Natural gas is an under-utilised resource – more than half of the natural gas produced is flared

Catching up & keeping pace with rising demand for electricity is critical to national development

Energy infrastructure & institutions, while improving, continue to be a serious constraint:

Legacy of damage & poor maintenance

Lack of consensus on governance of the hydrocarbons sector

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Oil is the cornerstone of Iraq’s economy

GDP, share of oil export revenues, population in 2011

Twin challenges for Iraq are to increase its oil revenues & then to use them to support greater diversification of its economy

Iraq Kuwait Iran Saudi Arabia

GDP

72% 55%

Oil export revenues

52% 24%

31 million 3 million 75 million 28 million

$115 billion $177 billion

$482 billion $578 billion

Population

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Oil is poised for a major expansion

Iraq oil production

Production more than doubles by 2020 & reaches more than 8 mb/d by 2035, with Iraq becoming a major supplier to Asian markets, especially to China & India

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2

3

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8

9

2012 2020 2035

mb/d North

Centre

South

Iraq oil exports

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2

3

4

5

6

7

8

9

2012 2020 2035

mb/d Other

Asia

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Iraq production outlook to 2020 in context

High Case 2012-2020

Central Scenario 2012-2020

Iraq 1972-1980

United States 2008-2016

Russia 2000-2008

Saudi Arabia 1966-1974

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1

2

3

4

5

6

0 1 2 3 4 5 6 7 8 Years

Oil

pro

du

ctio

n g

row

th (

mb

/d)

© OECD/IEA 2012

What will determine the pace of growth?

Political consensus on oil governance & legal framework

Speed & coordination of investment along the supply chain

Avoiding bottlenecks in storage & transportation

Sufficient water to support oil production

Drilling rigs & expertise

Iraq’s long-term oil & natural gas development strategy

Our High Case of 9 mb/d by 2020 would equal the highest sustained growth in the history of the oil industry

International market conditions

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Net water requirement in southern Iraq oil fields by source in the Central Scenario

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2

4

6

8

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12

2011 2015 2020 2025 2030 2035

High Case

Central Scenario

Net water requirement:

Current water injected

Water source (Central):

Common Seawater Supply Facility (CSSF) Water requirements unmet by CSSF

mb

/d

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Wells by type and rig count required in the Central Scenario

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100

200

300

400

500

600

700

800

2011 2015 2020 2025 2030 2035 0

25

50

75

100

125

150

175

200

Rig

co

un

t

Wel

l co

un

t Well count:

Exploration

Gas production

Water injection

Oil production

Rig count (right axis):

Central Scenario t: High Case

© OECD/IEA 2012

Average oil and gas project preparation and completion times in the Middle East

3 2 1 0 1 2 3 4 5 6

$282m

$1 183m

$520m

$863m

$565m

Years Feasibility to ITB ITB to investment Investment to completion

Upstream oil and gas (mid)

Domestic pipelines

Storage

Refinery

Upstream oil and gas (large)

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Iraq leads global oil production growth

Growth in oil production, 2011-2035

Iraq accounts for 45% of the growth in global production to 2035; by the 2030s it becomes the second-largest global oil exporter, overtaking Russia

Iraq 45%

Rest of OPEC 42%

Non-OPEC 12%

© OECD/IEA 2012

Iraq takes its place on the global gas map

Growth in key natural gas producers, 2011-2035

Iraq can potentially provide a very cost-competitive gas supply by pipeline to neighbouring countries or to Europe and – via liquefied natural gas – to Asia

50 100 150 200 250

Algeria

Brazil

Iran

Qatar

Iraq

Turkmenistan

Australia

United States

Russia

China

bcm

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Gas moves from sideshow to centre stage

Iraq’s natural gas balance

Reductions in gas flaring & development of new gas fields will be needed to meet Iraq’s growing domestic needs & its export ambitions

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40

60

80

100

2010 2015 2020 2025 2030 2035

bcm Production

Demand

© OECD/IEA 2012

Catching up with power demand

Oil helps to eliminate the power deficit in 2015. But without a longer-term shift to gas-fired power, Iraq would forego more than $500 billion in oil export revenue

Iraq electricity generation

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100

150

200

250

300

2010 2015 2020 2025 2030 2035

TWh Shortfall in generation

Hydro & other renewables

Natural gas

Oil

© OECD/IEA 2012

A chance to transform Iraq’s prospects

Iraq annual oil and natural gas revenues

$5 trillion in cumulative export receipts is 10% of all revenues from global oil trade; Iraq’s GDP in 2035 rises to the level of Saudi Arabia today

50

100

150

200

250

300

350

2012 2020 2035

Billion dollars (2011)

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A step-change in energy investment

Iraq annual average requirement for energy investment

The overall investment bill of $530 billion is 10% of oil export revenues, but annual spending needs to increase quickly over the current decade

5

10

15

20

25

30

2011 2012-2020 2021-2035

Billion dollars (2011)

Electricity

Natural gas

Oil

© OECD/IEA 2012

Delay would come at a high price

If investment & oil production growth is delayed then global oil markets tighten, with prices $15 higher in 2035, & Iraq’s cumulative GDP would be $3 trillion lower

Iraq oil production profiles

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4

6

8

10

2000 2005 2010 2015 2020 2025 2030 2035

mb/d

Central Scenario

Delayed Case

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Iraq’s transformation has global implications

With 45% of the anticipated growth in global production to 2035, Iraq is key to the long-term outlook for oil markets

Successful oil & gas development requires a shared vision for the sector & efforts to coordinate investment all along the supply chain

Delay would come at a high cost to Iraq and to international markets

Productive use of natural gas is critical to a healthy domestic balance

Oil export revenues can provide the foundations for a modern and prosperous Iraqi economy