Iraq over optimistic on oil, output to fall -IEA

LONDON, June 29 (Reuters) - Iraqi plans to raise oil output to 6 million barrels per day (bpd) by 2017 are likely to be over optimistic, the International Energy Agency said on Monday, saying oil capacity could fall over the next two years.

The IEA said in its Medium-Term Oil Market Report it had taken a very conservative view of Iraqi production capacity for 2008/14 despite tremendous international interest in the country's oil development projects.

It forecast Iraqi oil production capacity would fall to as low as 2.23 million bpd in 2010/11 before gradually rising to 2.7 million bpd by 2014. The country's oil production is now between 2.3 million and 2.4 million bpd, industry sources say.

Iraq has the world's third-largest proven oil reserves, estimated at 115 billion barrels, but its petroleum industry has been devastated by years of war and international sanctions.

Iraq is due to begin announcing the winners of tenders to develop eight major oil and gas fields on Tuesday, after a 24-hour postponement due to a thick sandstorm that engulfed Baghdad on Sunday. [ID:nLS369663] [ID:nLR275793]

Some of the world's biggest oil firms, including Exxon Mobil (XOM.N: Quote, Profile, Research), Total (TOTF.PA: Quote, Profile, Research) and Royal Dutch Shell (RDSa.L: Quote, Profile, Research), are competing for deals to develop the six oilfields and two gas fields in the war-weary country's first major tender since 2003.

"Official plans to increase production by 3.5 million bpd to reach 6 million bpd by 2017 appear over optimistic given the many political and security risks that continue to challenge the government and industry," the report said. "As a first step to urgently address the decline in the southern fields, the oil ministry has crafted a fast-track programme of drilling and upgrading projects by local or Iraqi joint venture companies that aims to ramp up production by 300-500,000 bpd at half a dozen different fields over the next 18 months.

"Many believe these projects time lines may be overly ambitious given practical operating and logistical problems." (Reporting by Christopher Johnson; editing by Sue Thomas)