Iraq eyes offshore oil exploration to boost reserves

Iraq eyes offshore oil exploration to boost reserves

Iraq eyes offshore oil exploration to boost reserves

BAGHDAD — Iraq is planning to start offshore oil and gas exploration to boost the OPEC nation’s reserves, Oil Minister Jabar Al-Luaibi said in a statement on Monday.

Luaibi said he “gave guidance to the Oil Exploration Company about the importance of exploring territorial waters to assess the hydrocarbons reserves and to boost Iraq’s capacity.”

Iraq last week announced an increase in its oil reserves to 153 billion barrels from a previous estimate of 143 billion barrels. Iraq has boosted output rapidly in recent years with the help of foreign oil companies to become OPEC’s second-largest producer behind Saudi Arabia. It agreed at the end of November to take part in an OPEC agreement to cut global supply to help to lift oil prices.

Meanwhile, oil prices are likely to stay in a tight range between $50 and $60 a barrel this year as a recovery in US shale output counterbalances the OPEC supply cut deal to reduce the global glut, Litasco Chief Executive Tim Bullock said in an interview.

A lack of volatility means trading houses will no longer have the extra boost as in the last two years following the 2014 oil price crash, said Bullock, a BP trading veteran who has run Litasco – one of the world’s largest traders and part of Russian oil major LUKOIL since 2012.

“2016 was good but it got tougher towards the end. There was less volatility and less structure … so that made it more difficult to make money. 2017 looks like an extension of that,” Bullock said.

“You will probably see the creation of a new reasonably tight trading range … with the OPEC cuts and the supply and demand coming into line… It’s difficult to see Brent going much below $50 per barrel and with shale and everything lining up on the other side, it’s difficult to see it going much above $60 per barrel.”
Bullock also said he saw little chance for spread risk-taking between US WTI and Europe’s Brent futures contracts to pick up steam as it did during previous years of relatively low oil price volatility in 2012-2013.

“Now with US exports, the whole system is much more linked together. It should correct itself faster – so there won’t be as much opportunity but also not as much risk,” he said.

Set up in 2000 as the trading arm of LUKOIL, Swiss-based Litasco focuses on selling its parent’s crude and products worldwide, serving its refineries in Italy, the Netherlands, Romania and Bulgaria and adding value through trading. “We’re more like a BP or a Shell. We have a system. Our job number 1 is to serve the system, and make sure we get the best price we can for the crude and products we sell and keep the refineries wet. We’re quite European centric generally,” Bullock said.

However, third party contracts have increased substantially over the past few years as Litasco’s footprint expanded into the United States, Asia and Africa.

Bullock said traded volumes grew slightly in 2016 from 3.2 million barrels per day (bpd) in 2015 with the split between group volumes and third party barrels remaining about 50-50.

Its parent LUKOIL produces around 2.4 million barrels per day, from fields in Russia, Iraq and the former Soviet Union.

Litasco is looking to expand globally with particular interest in West Africa and the United States.

“Basically if you want to be involved in West Africa then you have to be in Nigeria. So we’ve been trying to grow our business there over the last few years,” Bullock said.

Litasco secured a 2017 crude contract in Nigeria where it also delivers refined products. — Agencies