Iraq Strengthens Hand at OPEC with Oil Deals

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"OPEC is going to have to give room to Iraq."

Iraq has maneuvered itself into a strong position for future negotiations on output quotas with OPEC after awarding deals to international energy firms that would more than quadruple its output capacity.

Emerging from the shadow of war and keen to generate petrodollars to rebuild, Baghdad has deals on the table that would lift capacity to 12 million barrels per day in six or seven years.

That would add potential for another 9.5 million bpd to Iraq's output, a level of capacity only eclipsed by top oil exporter and OPEC's most powerful member Saudi Arabia.

"Iraq has taken a fairly hard line on the quota system," said one Iraq oil industry observer, on condition of anonymity. "It sees itself as rivaling Saudi Arabia. More so given the numbers bandied about by international energy firms at the bidding rounds."

Unlike OPEC's 11 other members, Baghdad is not subject to the output targets the group uses to set supply levels. OPEC exempted Iraq in the 1990s, when it was under sanctions.

As the country makes progress toward unprecedented development in its oil sector, sooner or later OPEC would want Baghdad to realign supply policy with other members and stick to an output target.

Iraq, one of OPEC's founding members, had shrugged off talk of output curbs as it put some of its giant oilfields on the block during two bid rounds.

But Oil Minister Hussain al-Shahristani said on Saturday that Iraq intended to work with OPEC to maximize revenues rather than pump flat out.

Iraq would be pumping below levels that would require it to rejoin the quota system for some time, Shahristani said. He declined to say what output level that would be.

"OPEC is going to have to give room to Iraq," said one senior Iraqi official. "Iraq has been deprived of its rightful oil sales for decades."

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