Iraq oil could hit 6 million barrels per day in 3-4 years

Friday, October 24, 2003

WASHINGTON -- Oil production in Iraq has the potential to hit 5 million to 6 million barrels per day in the next three to four years, triple the current output, Commerce Secretary Don Evans said Thursday.

The estimate was more optimistic than those by Iraqi oil officials.

Evans, just back from a visit to Iraq, said he was impressed with the free-market spirit and the number of foreign companies eager to set up operations even in the face of continuing security risks.

"I went to Iraq expecting to find a frightening environment, a feeling of desperation. I found anything but that," Evans said.

As evidence of Iraq's potential, Evans cited the country's oil reserves, second largest in the world behind Saudi Arabia.

"Are there vast resources that would cause somebody to think that over the next three to four years they could get oil production up to 5 to 6 million barrels a day? I think that is realistic to think in those terms," Evans said.

Iraq's oil ministry has a long-term target of producing 6 million barrels daily by 2014. The ministry's chief executive, Thamir al-Ghadban, told potential foreign investors this week that he hoped a strong recovery would allow the country to reach that target much sooner.

A study produced by a U.S. working group for the Pentagon earlier this year said it could take up to three years to return Iraq production to its pre-1990 levels of 3.5 million barrels per day and that could happen only after billions of dollars in repairs. This estimate ran counter to optimistic administration forecasts that much of Iraq's reconstruction could be financed by oil sales.

While Evans said Iraq produced 2 million barrels of oil one day during his trip, al-Ghadban said that the goal for October was 1.5 million barrels daily and that that would be difficult to meet.

As further evidence of improving conditions in Iraq, Evans pointed to more than 300 foreign companies that are attending private-sector sessions of a donors conference this week in Madrid, Spain.

He said this high level of interest, including American companies ranging from Pepsi-Cola to health care and telecommunication firms, showed business executives viewed Iraq, despite the security problems, as a good place to make investments.

"I can tell you there is a lot of capital from around the world, including right here in the United States ... saying I want to locate my plant right there on that piece of land" in Iraq, Evans said.

In a wide-ranging interview, Evans also previewed a trip beginning Friday to China, which will include meetings with top Chinese officials including Premier Wen Jiabao.

The administration is under increasing political pressure to narrow America's $103 billion trade deficit with China as a way of halting the loss of 2.7 million U.S. manufacturing jobs over the past three years.

"I will be taking a strong message of fighting for a level playing field for our workers," Evans said. His trip follows recent meetings President Bush and Treasury Secretary John Snow have had with Chinese leaders in a so-far-unsuccessful effort to get the Chinese government to allow its currency to rise in value against the U.S. dollar.

American manufacturers charge the Chinese are purposely undervaluing the yuan to give them a trade advantage of as much as 40 percent against U.S. goods.

Evans said he would leave the currency issues to Bush and Snow. He said he would urge the Chinese to put in place tough criminal penalties to halt the piracy of U.S. computer software programs, citing U.S. industry estimates that 90 percent of all the computer programs in use in China have been pirated.

Evans said the his department would be more active in bringing unfair trading cases, instead of simply reviewing complaints filed by U.S. industries. A new enforcement office will monitor 30 sectors of the Chinese economy searching for examples of unfair trade practices that could result in the imposition of economic sanctions, he said.

On other issues, Evans:

-- Declined to predict whether Bush will retain penalty tariffs on foreign steel even if the World Trade Organization next month upholds its ruling that the tariffs violate global trade rules. Bush's political advisers believe the steel tariffs are important to winning key Rust Belt swing states in next year's elections, but retaining the tariffs could expose the country to $2.2 billion in retaliatory trade sanctions.

--Said he still enjoys an occasional exercise workout or meal with the president, a friend for more than three decades, but that it's not like their days in the oil business in Midland, Texas, where they would attend church together and meet every day for a three-mile jog.

Evans said, "He knows that if he needs me, I'm available and I know that if I need him, he's available. That's the kind of friendship we have."

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