Experts are questioning how OPEC countries work out their figures for oil reserves when the numbers jump sharply from year to year.
The issue arose from a statement by Iraq deputy prime minister Hussain al-Shahristani, who has revealed OPEC countries are discussing export quotas.
The aim is to keep the price of oil stable by manipulating supplies, but many critics are suggesting that any data coming out of OPEC is questionable at best.
Quotas are a waste of time
One analyst Mehdi Varzi, president of Varzi Energy, feels any OPEC efforts to manage oil production among member states would be “a complete and unmitigated waste of time.”
He explained that each country would try to put forward special reasons for having a higher quota – like Nigeria and Iran arguing they have larger populations and Iraq complaining they should have special treatment for sitting out of the market for so long.
Over the years, different OPEC countries have put a number on their oil reserves that appears inconsistent from one to the next and without any external audit or verification.
Neil Atkinson, head of analysis at Lloyd’s List Intelligence, recalls oil reserve statistics going back to the late 1980s that changed for no apparent reason.
For instance, Iran announced a 32% year-on-year reserve increase in the early 2000s. OPEC recorded a boost from 99.08 billion barrels in 2001 to 130.69 billion barrels in 2002 and a 10% increase between 2009 and 2010, from 137.01 billion barrels to 151.17 billion barrels.
Flawed thinking
“Quotas were a shambles last time around and I don’t think it’s politically possible for every country in OPEC to agree a system,” said Atkinson.
“Sharing production means some countries would have to give up market share in favour of others. Tensions with OPEC are fraught enough, especially between Saudi Arabia and Iran.”
In the analysis of the proposal for quotas by industry specialist Platts, Atkinson points out that if Iraq ups production without any corresponding rise in demand, quotas mean other OPEC countries will have to produce less and face the economic consequences.
The analysis also reveals flaws in the Iraqi minister’s thinking.
Talks underway to bring Libya and Iran to remove sanctions and other bars to their exporting oil may soon be removed, leaving an increase in production by Iraq making supply exceed demand, which could drive down the price a barrel of oil.
