IMF Forecasts Iraq Economic Growth.

IMF Forecasts Iraq Economic Growth. The IMF director for the Middle East, Mohsin Khan, on Jan. 16 saidIraq's economy in 2008 would expand significantly from the previous2007's lows as long as the security situation allowed for higheroil output and investment. Iraqi crude oil output was forecast to climb200,000 b/d to 2.2m b/d in 2008. Khan said: "We are expecting much higher growth, and it isreally coming from the fact that we expect oil production to be higher.We also think that the government will..., if the security situationcontinues to improve,...that the government will be able to fulfill itsmajor investment plan in the oil and the non-oil sectors". He saidthe higher oil output would push GDP growth significantly up to over 7%,possibly higher, in 2008 and 2009, from just 1.3% in 2007 when bittersectarian violence drove the country to the brink of civil war. Khan said 2007 growth for Iraq may well turn out to be strongerbecause the IMF's forecast of 1.3% was based on indicators for thefirst six months of the year. Since then, new data for the second halfof 2007 showed economic activity may have been stronger than believed.He added: "The big change is going to be - and what we'rehoping for - is oil production. Beyond that for 2009 we also expect itto be in the 7 to 8% range, but of course all of this is conditional onoil production expansion and the security situation improving". In December, the IMF approved a 15-month US$744m loan agreement forIraq, which Khan said would focus on maintaining economic and financialstability, and facilitate higher investment and production in thecountry's key oil sector. Khan said annual consumer price inflation was targeted to declineto 12%. He said rising crude oil export prices had more than offsetproduction shortfalls and boosted international currency reserves byclose to $7 bn. He said that, by end-2007, Iraqi reserves were $27 bn,some $6 bn higher than projected. Despite a stronger fiscal position, Khan said Iraq would still needaid, particularly when it came to securing the country. He said:"The fact of the matter is we have a very conservative fiscalprojection, because we base it on a pretty low price of oil and I thinkthe Iraqis do this by design. So the [crude] oil prices we are assuming,for example, in 2008 is $57 a barrel, which is obviously much, muchlower than the world price. So I think even on that basis they arefiscally sustainable. If in fact we factor in today's price, thenthe fiscal picture looks very, very good". Iraq, a founding member of OPEC, does not have an quota from theorganization as its oil infrastructure and production capacity are stillawaiting restoration to levels before Saddam Hussein's August 1990invasion of Kuwait. By then, its capacity had exceeded 3m b/d. Now, theOil Ministry in Baghdad is forecasting a boost in capacity to more than3m b/d before end-2008 and over 6m b/d several years later. OPEC in December produced over 32m b/d of crude oil, up fromNovember's 31.65m b/d. Production from OPEC-10 bound by outputquotas averaged 27.43m b/d, 460,000 b/d more than in November and177,000 b/d higher than the group's official 27.253m b/d ceilingwhich came into effect on Nov. 1. The bulk of the December output increase was due to higherproduction from the UAE as key maintenance programmes were brought to aclose. UAE production was 2.5m b/d, 350,000 b/d higher thanNovember's 2.15m b/d. Increases of 10,000-40,000 b/d came fromIndonesia, Iran, Kuwait, Libya and Saudi Arabia. The OPEC-10 excludesIraq and new members Angola and Ecuador. Iraqi production in December was almost 2.5m b/d, despite a sharpfall in exports from November. Angolan output edged up from 1.78m b/d to1.8m b/d. Ecuador, which left OPEC in the early 1990s but resumed itsmembership in mid-November 2007, produced about 500,000 b/d. OPEC'sproduction ceiling rose to 29.673m b/d on Jan. 1, 2008. World Oil Production Could Peak As Demand Falls: Addressing ameeting at the UK House of Commons organised by MPs into peak oil, BPSpecial Economic Advisor Peter Davies on Jan. 16 said world oilproduction may peak in the coming years, but it will be because of adecline in demand for petroleum rather than constraint on supply. Thiscame in the wake of remarks from other industry officials who in recentmonths questioned mainstream supply forecasts, suggesting a peak in oiloutput may be closer than the industry had previously admitted. Davies said: "I believe there is a realistic possibility thatworld oil production will peak within the next generation as a result ofpeaking demand". A rally in WTI crude oil prices, which rose above$100/b on Jan. 3, is leading to growing interest in peak oil - the viewthat supply has reached, or will soon reach, a high point and then fall. BP, the world's third-largest publicly traded oil company bymarket value, dismisses the view that there is a problem with the amountof oil left in the ground. Statistics complied by BP show the world hasproven oil reserves of 1.2 trillion barrels, enough to sustain currentoutput for 40 years. Rather, Davies said environmental regulations, including efforts toreduce greenhouse gas emissions, could cause consumers to move away fromoil. He said: "I think we will run out of demand before we run outof supply. There's a distinct possibility that global oilconsumption could peak as a result of climate policies". The BP economist said there were also concerns whether there wasenough investment. Influenced by the trend of resource nationalism, manymajor oil producing states now ban foreign investment in their oilfieldsor allow it on terms the oil firms deem uncompetitive. Davies said: "An imminent peak in oil production is notlikely. Valid concerns remain over investment, especially inresource-rich regions". He said it was possible to boost world oilproduction to 100m b/d, a rate senior executives, such as the CEO ofTotal, have questioned in recent months. Davies said: "I believe 100m b/d is achievable. This isachievable in resource terms but it does come down to how muchinvestment is going to take place".