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UPDATE 2-Iraq's oil exports up more, output may double by 2020

* Iraq oil official sees 2.8 mbpd Oct exports

* IEA output forecast warns of investment delays

* Delays could lift global oil prices more

(Adds quotes) By Alex Lawler and Peg Mackey

LONDON, Oct 9 (Reuters) - Iraq's oil exports are expected torise to their highest in decades this month and production is oncourse to more than double by 2020, as it cements its place asOPEC's second-biggest producer after Saudi Arabia.

The International Energy Agency said Iraq will provide thelargest contribution to global suppply growth in coming decades,and its production would reach 6.1 million barrels per day (bpd)by 2020 from around 3 million bpd now under what it called itscentral scenario.

That prediction would be half of that implied by Iraq'stargets signed with foreign oil companies, and the Paris-basedIEA highlighted the risk of production rising more slowly thanexpected, leading to higher global prices.

"This is much lower than the contracted projects and muchlower than the Iraqi government's official targets," said FatihBirol, the IEA's chief economist and the main author of the IraqEnergy Outlook, at a news conference in London.

"We think this trajectory is plausible when you look at thechallenges in front of Iraq."

Industry executives have questioned whether Iraq can boostoutput to 12 million bpd by 2017, as called for under currentcontracts, due to a range of hindrances including infrastructurebottlenecks, red tape and bureaucracy.

The IEA, which advises 28 industrialised countries onenergy, prepared its report in co-operation with the Iraqigovernment. A former Iraqi oil minister thought the IEA'scentral forecast was realistic.

"I think it is attainable and Iraq should be able to solvethe problems related to water injection, storage andtransportation pipelines," Issam Chalabi, who ran Iraq's oilindustry in the 1980s, told Reuters.

"But the main challenge remains in finding new exportoutlets."

HIGHER EXPORTS

Iraq's oil production stagnated for years due to wars andsanctions, even though the country holds the world'sfourth-largest oil reserves.

Output started to rise in earnest in 2010, after Baghdadsecured contracts with companies such as BP Plc , ExxonMobil , Eni and Royal Dutch Shell .

Production this year overtook that of Iran, traditionallythe second-largest producer in the Organization of the PetroleumExporting Countries whose exports have been curbed by sanctionsover Tehran's nuclear programme.

Iraq's exports of 2.6 million bpd in September were alreadythe highest in more than 30 years and a senior Iraqi oilofficial said on Tuesday oil exports were expected to rise above2.8 million bpd this month.

"I'm quite confident that if all goes well, exports willincrease to at least 2.8 million," the official, who declined tobe identified, told Reuters.

Iraq's southern oilfields are set to contribute about 2.4million bpd of Basra crude to the export total in October whilethe northern Kirkuk oilfields are due to pump around 450,000bpd, he said.

Exports from Kirkuk have risen after Iraq's centralgovernment and the autonomous Kurdistan region agreed to end anoil payment dispute.

The increase in Iraqi supplies this year had helped to keepa lid on oil prices as Western sanctions targeted Iran's exportsand supply fell short from other regions, such as the North Sea.

But the IEA's report warned that, over the longer term,delays to investment in Iraq could tighten the global market andpush prices higher.

Under a delayed scenario, in which energy investment in Iraqrises only slowly from 2011 levels, oil production reaches 4million bpd in 2020 and 5.3 million bpd in 2035.

In this case, Iraq would face a $3 trillion loss in nationalwealth due to lower oil export revenues and a failure of otherindustrial and services sectors to develop.

Oil prices would also be higher, reaching almost $140 abarrel in 2035 in real terms, nearly $15 higher than in thecentral scenario, the IEA said.

"What happens is that the global oil markets will be set ona course for troubled waters," Birol said. "This would meantightness in the markets and higher prices, which we think isnot good news for the economy."

(Editing by William Hardy and Alison Birrane)

((alex.lawler@thomsonreuters.com))

Keywords: IEA IRAQ/