In its Medium-Term Oil Market Report, released today, the IEA said it had taken a very conservative view of Iraqi production capacity for 2008 to 2014 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 to 2011, before gradually rising to 2.7 million bpd by 2014, a Reuters report said.

The country's oil production is now between 2.3 million bpd and 2.4 million bpd, industry sources said.

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 tomorrow, after a 24-hour postponement due to a thick sandstorm that engulfed Baghdad yesterday.

Some of the world's biggest oil companies, including ExxonMobil , Total and Shell, 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 300,000 bpd to 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."

Published: 29 June 2009 11:56 GMT  | Last updated: 29 June 2009 13:45 GMT