When will OPEC have to address the quota issue?

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OPEC meeting after OPEC meeting has side-stepped potentially explosive debate on how to realign the group's system of output curbs.

This week's 157th conference in Vienna was no exception even after Iraq's announcement early this month its reserves were 25% higher than previously stated stung Iran into a counterclaim to wrest back its status as OPEC's third largest reserves holder.

Iraq is still surveying and could raise its reserves estimate further. Iran has also said more additions to its oil wealth were likely.

The following raises some of the issues at stake.

What is the significance of iraq's reserves  Revision in the opec context?

Analysts have frequently disputed OPEC members' figures on the size of their oil reserves on the grounds they have a vested interest in making them as high as possible to qualify for higher OPEC production curbs.

Following previous controversies, the current system of output targets is based on members' actual production, rather than reserves. Iraq's reserves claim is nevertheless viewed as positioning as the country's oil output begins to recover from years of war and sanctions.

It should also be seen in the context of contracts signed with international firms last year that could in theory raise Iraq's capacity to 12 million barrels per day (bpd) in seven years' time placing it around level with top exporter Saudi Arabia.

For now it is the only one of the 12 OPEC members without an OPEC target.

Its oil minister has said the debate on setting it a goal need not begin until it is pumping 4 million barrels per day (bpd) by around 2013 compared with its current output of around 2.5 million bpd.

How sooner could it be

Iraq still faces huge challenges of lack of government and security problems, but international firms want to move quickly to generate returns as soon as they can and analysts anticipate realising even some of the nation's potential could have a big impact on the oil market.

This week's OPEC meeting was smooth because a weak US dollar -bullish for dollar-denominated oil as the United States considers shoring up its economy with more quantitative easing has kept the oil market firm enough to prevent lax compliance with OPEC's output ceiling becoming an issue.

Some argue the dollar effect will continue to buoy oil prices, but others see the prospect of Iraq adding more crude than the market can absorb when economic recovery is still sluggish, subduing demand and leaving inventory levels high.

"The reserves issue in a sense is a non-issue because quotas are no longer based on reserves, but Iraq is definitely going to bring new volumes on," said David Kirsch of PFC Energy.

"Ultimately, there is not going to be enough demand to absorb extra production."

How much do rivalries matter?

Tensions over reserves and output quotas added to the triggers that led to the 1990 Iraq invasion of Kuwait after a big Kuwait reserves revision kicked off a reserves bidding round and Iraq took issue with Kuwaiti overproduction.

Iraq's latest reserves revision to 143 billion barrels compares with Iran's new figure of 150.31 billion. Venezuela earlier this year laid claim to 211 billion barrels and Saudi Arabia says it has more than 260 billion.

Venezuela's reserves include heavy, difficult-to-extract crude and its production trails that of Iran and Saudi Arabia OPEC's current top two producers.

The current context is very different from that of the late 1980s, but analysts still see scope for tension. Although the greatest potential for conflict is with Iran, Saudi Arabia could also be ruffled.

When Iraq last had an OPEC quota before 1990, it was level with Iran's, but Baghdad has made clear following last year's international licensing rounds, its ambition is to be on a par with Saudi Arabia.

Iran, seated as Iraq's alphabetical neighbour around the OPEC conference table, told reporters on Thursday: "There is no competition with Iraq."

Saudi Arabia has reaped the benefit of high revenue from strong oil prices while Iraq's own output was hobbled by war and the kingdom might be willing to accept a period in which Iraq grows strongly while its production is stable.

Still analysts say it is unclear whether Saudi Arabia would object to losing some of the status it derives from being OPEC's de facto leader and holder of spare capacity to add to or subtract from the oil market as demand dictates.

"Saudi Arabia's power within OPEC and much of its international political standing derives from its maintenance of a spare capacity cushion," said Samuel Ciszuk of IHS consultancy.

"If Iraq were to join it in maintaining a significant capacity cushion, its global price influence power would be significantly diluted."

At the same time Iran would be demoted to third place in the OPEC hierarchy, assuming that even if it further revised upwards its reserves, its production failed to keep pace.

How much do other opec members care?

Other OPEC countries have also agitated for higher output targets.

Venezuela last year released crude oil and product export data to try to clarify its production levels after its government said they had been underestimated by sources such as the International Energy Agency, which represents consumer countries.

As a legacy of past disputes about how much individual nations have said they were producing, OPEC does not provide official production figures and instead uses secondary sources to monitor its output.

Emerging, like Iraq, from years of war, Angola has brought in international companies to develop very costly offshore fields and needs to pump as much as it can to provide swift revenues.

Nigeria's production has recovered from the impact of militant violence and it is one of the group's most salient over-producers. Its minister has said she wants the nation to be given a higher output target.

In common with Angola, Nigeria has joint ventures with foreign operators keen to see a swift return on investment and reluctant to idle capacity.

How will opec calculate production curbs in future?

OPEC has tended not to reveal its methodology when setting country's output targets, but delegates acknowledged in 2007 the group had shifted to a system of basing output targets on actual production rather than reserves.

Iraqi Oil Minister Hussain al-Shahristani said the system could be changed again.

"In the past, allocations were based on production capacity, on reserves, on the economic needs of the country," he told reporters this week.

"In future, we need to revise these criteria and decide what weight to give to each of these parameters."

Might the issue never be forced at all?

After tense debate in the past, OPEC has deferred the issue on realigning output curbs for as long as possible and some say may never have to address it if economic growth gathers pace and oil reserves are much more depleted than OPEC members' ambitious claims imply.

They believe OPEC and non-OPEC alike would have to produce all they could to meet demand.

"OPEC basically loses its significance because nature is doing its job for it," said Colin Campbell, prime exponent of the peak oil theory that the world's conventional oil reserves are at or near a peak.

He has repeatedly said OPEC reserves figures are fictitious.

Does it matter if opec produces at will?

An environment in which all producers pumped at a maximum would strip the Organization of the Petroleum Exporting Countries, currently supplier of more than a third of the world's crude, of international influence.

"It would in effect mean that it has lost its market-making ability and that it would have lost its ability to control prices," said Ciszuk of IHS.

"It is when they have a spare capacity, which they can restrict, that they control the global price."