Many in the oil industry will remember well the mantra of Iran's delegation to OPEC in the 1980s: that Iran's OPEC quota should always be double that of Iraq. They will also remember the late 1988 OPEC meeting at which Tehran accepted quota parity for Iraq.
That was just 20 months before Iraq's invasion of Kuwait, at which point the notion of parity flew out of the window. Under UN sanctions, Iraq exported no oil for several years. Exports finally resumed in 1997 under the oil-for-food agreement with the UN, but production capacity remained stifled.
But Big Oil is now working in Iraq and oil production has expanded to overtake that of Iran, which is struggling to maintain output and exports in the face of sanctions that directly target its oil revenues.
On August 12, Iraq's deputy prime minister and former oil minister Hussein al-Shahristani made a point of saying that Iraqi output had risen about 3.2 million b/d and was now higher than that of Iran, Kuwait and the UAE.
OPEC, which uses secondary sources to monitor its own production, estimated Iraqi output at 3.079 million b/d in July. Iraq itself told OPEC it pumped 3.05 million b/d in July, up from 2.95 million b/d in June. Iran did not provide a figure for July output, but the secondary source estimate was 2.817 million b/d, down from 2.99 million b/d in June.
The International Energy Agency on August 10 pegged Iraqi output at 3.02 million b/d in July, up from 2.91 million b/d in June, and Iranian output at 2.9 million b/d in July, down from 3 million b/d in June.
A few days earlier, a Platts survey of OPEC and oil industry officials and analysts estimated Iraqi output at 3.05 million b/d, up from 2.97 million b/d in June. It put Iranian output at 2.9 million b/d, down from 3.1 million b/d in June.
Becoming OPEC's number two producer after Saudi Arabia is an accomplishment not to be sneezed at. Iraq may lag behind the OPEC kingpin to the tune of several million barrels per day of production capacity, but as this capacity continues to grow, Baghdad's power of influence within the oil cartel will increase.
Iran, meanwhile, is looking at its exports fall to the point where, some analysts suspect, it may be forced to shut in some production.
Tehran had hoped to find homes in Asia for the 500,000 b/d or so of crude that can no longer move to Europe as a result of European Union sanctions having come into force on July 1. But sales to top customers in Asia have been compromised by the EU's ban on insurance provision for any shipments of Iranian oil and by US financial sanctions from which several Asian countries have obtained waivers by cutting their imports of Iranian oil.
Iran's proven reserves, at nearly 155 billion barrels, still exceed Iraq's 141.35 billion barrels, something which should, in theory, be taken into account during any future distribution of output quotas.
But in the here and now, production is what counts. And while Iran, in third place behind Iraq and Saudi Arabia, may still be close to the top of the OPEC production ladder, it can hardly feel comfortable there, especially with Kuwait and the UAE close behind.
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