Is Iraq a “Game-Changer” for Peak Oil?

The Oil Drum is one of those great blogs that discusses energy and peak oil.

It has consistently and coherently been ahead of the curve, shall we say, when it comes to exploring the issue of peak oil and what we, as a society, should be doing about it.

But the New Year has brought an interesting perspective from one of the Oil Drum’s former staff writers, Stuart Staniford, about how Iraqi oil changes the peak oil equation.

The exploitation of Iraq’s oil industry is gathering pace. Just yesterday the country’s oil Ministry announced it had approved all pending deals with foreign oil companies in deals that could bring an estimated 100 billion dollars in investment.

Although we are now entering the realm of speculation and hype for which the oil industry is legendary, these deals could argues a wire report yesterday, increase Iraq’s projected oil output to 12 million barrels of oil per day from current production of around 2.5 million bpd.

No one believes that that kind of massive increase in production will be easy given the ongoing chronic security problems, dilapidated infrastructure and political in-fighting, and it is envisaged that it could take 6 to 7 years to reach such a figure.

But the fact that Iraq is set to increase production changes the peak oil debate, argues Staniford.

Writing on the Oil Drum yesterday, he noted that “I have been associated with the view that the stagnation of oil supply growth from late 2004 on was likely to be the onset of a “bumpy plateau” of oil production – that oil production would not go too much higher, although it wouldn’t decline quickly either.

Yesterday he conceded that “I think it’s important to note that a potential game-changer has developed recently that could render that point of view obsolete (which is a kinder, gentler way of saying “wrong” :-).”

He writes that we need to take “seriously” the thought that Iraq might actually succeed  in increasing its production  significantly.

“If it did succeed” argues Staniford, “that would act to delay the final plateau of oil production by a decade (ballpark), make that plateau be at a higher level (95-100mbd ballpark), and significantly moderate oil prices in the meantime, with even some possibility of causing a serious breakdown of OPEC discipline and a period of significantly lower prices akin to the 1980s-1990s lull (though probably not as long or as deep a lull as that).”

He continues: “If that were to occur, it would likely have profound consequences for alternative energy projects, biofuel companies, and automobile fuel efficiency. A period of lower oil prices will put adaptation projects on hold for the duration.”

Lower prices might also scupper investment in the tar sands – so you get a strange situation where Shell’s investment in Iraq undermines its investment in Canada. But whether the boys from Shell have thought of that one, I’m not sure. But maybe they ain’t that clever, either.

In the mean-time, Staniford’s concession that he might be wrong is grist to the mill for the business blogs: “We’ve never believed in peak oil as a even a likely long-term energy disaster for humanity. Every time oil prices spike, future oil demand is reduced, as consumers and governments panic, then shift towards other sources of energy,” argues Business Insider.