BAGHDAD, June 14 (UPI) -- Iraq has formally lowered its controversial oil production target by a quarter, apparently recognizing it was way too ambitious but industry analysts say even the scaled-down plan may still be beyond Baghdad's reach because of shale oil.
A blueprint drawn up several years ago by then-Oil Minister Hussein al-Shahristani declared Iraq wanted to boost production to 12 million barrels a day by 2017.
Industry analysts insisted Baghdad could never achieve that, largely because of its abysmal lack of energy industry infrastructure, particularly functioning pipelines and storage facilities.
That problem, which has been only partially addressed, has been superseded to a significant degree by the question of whether the global oil market can absorb such a boost in Iraqi production.
Worsening sectarian violence isn't helping either.
The Baghdad government Wednesday unveiled a new, more realistic, production strategy: tripling current production to 9 million bpd by 2020, cutting the output level by a quarter, and extending the time frame by three years.
As part of this long-term blueprint, known as the Integrated National Energy Strategy, Baghdad aims to push production up from the current 3.2 million bpd to 4.5 million bpd by the end of 2014.
Thamir Ghadhban, senior energy adviser to Prime Minister Nouri al-Maliki, said this was "the medium scenario," which the government examined and aims for exports of 8 million bpd by 2020 with 1 million bpd allocated for Iraqi refineries.
Ghadhban, a former oil minister, is also chairman of the INES committee, which has drawn up the new strategy in the last two years in cooperation with the World Bank and consultants Booz & Co.
It should be noted the International Energy Agency, the West's energy watchdog based in Paris, predicted in December 2012 Iraq would be producing only 6.1 million bpd by 2020.
That's about the level the Iraqis had forecast under the "low scenario" examined by the INES committee.
To reach the 2020 target under the new blueprint, the Iraqis estimate they will need investment worth $620 billion in the oil and gas sectors, and related industries, through 2030.
Increased exports in the next few years will provide some of this. But international oil companies will likely be expected to make significant contributions.
Given recent signs foreign outfits are more reluctant to accept the tough terms Baghdad has so far imposed on production contracts, it's not clear whether that kind of investment will be forthcoming.
The recent defection of front-rank majors like Exxon Mobil and Chevron Corp. of the United States, Total of France and Gazprom Neft of Russia from megafields in southern Iraq to more potentially lucrative deals with the Kurdistan Regional Government in northern Iraq underlines that reluctance.
Iraq has the world's fourth largest proven reserves of conventional oil, recently boosted by Baghdad to 150 billion barrels. The Kurds have an estimated 45 billion, which are included in the overall Iraqi total.
The IEA lists Iraq as the world's third largest oil exporter, ranked second in the Organization of Petroleum Exporting Countries after Saudi Arabia. Oil provides 95 percent of Iraq's revenue.
Another problem is growing U.S. production, largely through massive shale oil deposits in Texas and North Dakota.
OPEC members Algeria, Angola and Nigeria will have to seek new customers although Iraq and the Persian Gulf states will not be as greatly affected as the bulk of their crude exports now go to Asia.
Chinese companies, which are pouring around $2 billion a year into Iraq's energy sector, already buy nearly half of Iraq's oil production, some 1.5 million bpd.
They're looking to expand their share. State-owned China National Petroleum Corp. is bidding for a 60 percent stake in the $50 billion West Qurna 1 megafield Exxon Mobil will have to let go for defying Baghdad to hook up with the Iraqi Kurds in 2011.
Shahristani, now deputy prime minister for energy, said Baghdad's talking with foreign oil majors operating in Iraq to lower long-term production targets agreed in 2009-10 when contracts were signed.
He said while marginal fields around the world need oil prices of $75-$80 per barrel, Iraq prefers them to be more than $90 per barrel. They currently stand at around $92.
"Our budget's based on $90," he said. "We don't expect it to fall below that."