NEW YORK (Commodity Online): BofAML (Bank of America Merrill Lynch) now forecasts Iraqi oil production to average 4.9 million b/d in 2017, compared to a government target of 9-10 million b/d.

Given the uncertain prospects for capacity growth in OPEC-11, Iraq’s output is becoming increasingly critical for global oil supplies. Crude production has increased at a phenomenal pace, recently rising to a record high of 3.2 million b/d from an average of 2.4 million b/d in 2010.

From a technical perspective, Iraq’s oil projects are among the most straightforward and least expensive in the world, in terms of capital costs and operating expense.

“Yet while the potential is huge, our outlook remains cautious as politics, security and infrastructure present major challenges to oil development.” The bank said in a report.

Last week the Bank made the point that the level of crude oil output required to keep oil prices steady while absorbing an expanding labour force is around 1.5% or 1.4 million b/d per annum.

With non-OPEC oil supply growing by an average 480 thousand b/d over the last decade, the world is growing rapidly dependent on OPEC.

Facing rampant output losses first from Libya and then from Iran, OPEC has been pressured to open the taps over the last couple of years and boosted production to new record highs, in turn cutting into spare capacity.

OPEC-11 barely increasing capacity in the next years

Most spare capacity sits within Saudi Arabia while many large OPEC reserve holders are wrought with problems. Excluding Nigeria, Iran and Libya, OPEC spare capacity outside Saudi Arabia sits at just 0.7 million b/d.

“On our estimates, OPEC-11 spare capacity will likely stay minimal given a dearth of new projects in the next 5 years.” said the bank.

Kuwait, Qatar and Ecuador have no projects planned at all, and we see limited growth from Algeria. New projects in Angola, Nigeria and Venezuela could suffer from chronic delays, shortfalls and a bad security climate. UAE growth will likely be marginal.

More importantly the capacity gains the Bank expects to see in Saudi Arabia will likely only mitigate the declines of existing fields.