Iraq, seeking to more than double oil output by 2015, is poised to overtake Iran as OPEC's second- largest producer by the end of the year as sanctions hobble crude production in its Persian Gulf neighbor, Bloomberg reported.
Iraq is pumping at the highest rate since Saddam Hussein seized power in 1979, supported by foreign investors such as Exxon Mobil Corp. and BP Plc (BP/) that are developing new fields and reworking older deposits.
The country produced 3.03 million barrels a day in April, 7.7 percent more than in March, while Iranian production declined to 3.2 million barrels a day, according to an OPEC monthly report on May 10.
Iraq's output last exceeded Iran's in 1988, when the countries ended their eight-year war, statistics compiled by BP show.
With oil supplies rising from Libya and Saudi Arabia, the recovery of Iraq's biggest foreign-currency earner is helping to alleviate concern that a European Union embargo on Iranian crude starting July 1 will squeeze global output.
Tensions over Iran's nuclear program and the prospect of curbs on its oil sales pushed Brent crude to a 3 1/2-year high of $128.40 a barrel on March 1. Oil fell to as low as $111.40 on May 11.
Iraq holds the world's fifth-largest crude reserves, according to data from BP that include Canadian oil sands. Production has revived since the U.S.-led invasion of 2003 ended more than two decades of stagnation caused by wars, sanctions and underinvestment.
Since Hussein's ouster, the government has awarded 15 oil and gas licenses to foreign companies, and 47 potential bidders have signed up for its next auction of exploration rights scheduled for May 30.
The country is targeting production of 3.4 million a day this year and more than 4 million barrels in 2013, according to Asim Jihad, a spokesman for the Oil Ministry in Baghdad.
Export shipments from Iraq surpassed those of Iran during the first quarter of the year, David Fyfe, head of the International Energy Agency's market and industry division, said on May 7 in Bahrain.
Iranian sales dropped by 400,000 barrels a day to 2.1 million barrels a day for the same period, Fyfe said, while ministry data show Iraq shipped a daily average of 2.145 million barrels in the quarter and 2.5 million in April.
Crude exports from Iran averaged 1.8 million barrels a day in April, the agency said on May 11, citing traders it didn't identify. As much as 35 million barrels may be held in floating storage, compared with 8 million in March, it said.
Exports to Asia
"Asian markets, chiefly China and India, have become very important for Iraq's crude exports over the last few years, making up 60 percent of Iraq's total crude exports," Jihad said on May 10. "Crude exports to Asia are still on the rise."
As sanctions have made it more difficult for importers to buy Iranian petroleum, Iraq overtook Iran to become the second- largest supplier of crude to India after Saudi Arabia in the 12 months through March, according to data from the Associated Chambers of Commerce and Industry of India.
Iraq still faces hurdles to its re-emergence as a reliable global supplier. As the U.S. withdrew the last of its troops from the country in December, Prime Minister Nouri al-Maliki's government reinforced security at energy installations, including the use of army helicopters.
Bombings, assassinations and attacks on pipelines and refineries have persisted, though their frequency and intensity has decreased.
Although the two new mooring facilities helped boost output from Basra in southern Iraq by 200,000 barrels a day last month, they are operating well below capacity because of pipeline and storage constraints, the IEA said.
Exports from the offshore units will be capped for now at 300,000 barrels, compared with planned capacity of 1.8 million.
Even with the Kurds halting shipments of crude on April 1 through a pipeline controlled by the central government, the country's progress in rebuilding its energy infrastructure through investment and foreign expertise has allowed Iraq to raise crude production by 45 percent since the end of 2003, according to data compiled by Bloomberg.
"The investment environment does look more robust in Iraq than in Iran at the moment," the IEA's Fyfe said.
Edited by: S. Isayev