Iraq has announced the discovery of a large oil field that is expected to significantly boost the country’s hydrocarbon reserves. However, Baghdad faces several challenges in fully exploiting this new resource.
Located in central Iraq, the field contains more than 2 billion barrels of medium and light crude oil. The estimated daily output of this field is 5,000 barrels, according to reports from the Iraqi news agency.
As the second-largest oil producer in OPEC, following Saudi Arabia, Iraq holds the world’s fifth-largest proven oil reserves, totaling 145 billion barrels. This accounts for 17 percent of the Middle East’s proven reserves. The majority of Iraq’s oil comes from regions in the south, such as Basra, as well as areas near Diyala, east of Baghdad, and Kirkuk in the northeast.
The new discovery is part of the southeastern Baghdad field and was made in partnership with the Chinese company EBS. Iraq aims to increase its oil reserves to 160 billion barrels, a target announced by Oil Minister Hayan Abdel Ghani last year. The country also plans to increase its oil production capacity to 6 million barrels per day (bpd) by 2028.
Currently, Iraq produces around 4 million bpd, but it has faced criticism from OPEC+ for overproducing and not adhering to its production quotas. This non-compliance has hampered the group’s efforts to push oil prices higher. While Iraq’s oil production is expected to rise by just 200,000 bpd by the end of 2026, analysts warn that the country has yet to compensate for its overproduction since January 2024. As a result, some existing fields will face restrictions.
James Forbes, a senior analyst for upstream oil at Facts Global Energy, noted, “There is no space for new developments without cutting existing fields further.”
Iraq’s Prime Minister, Mohammed Shia Al-Sudani, has emphasized the country’s goal of increasing oil exports while reducing its reliance on natural gas imports from neighboring Iran, which supply about a third of Iraq’s gas needs. However, years of conflict, political instability, and corruption have hindered investment in the sector.
Alexandre Araman, director at Wood Mackenzie, highlighted the fiscal challenges, stating, “Creating value from barrels is difficult.” As a result, many Western companies have reduced their presence in Iraq. Currently, Chinese companies manage about one-third of Iraq’s proven oil reserves and two-thirds of its production.
Oil exports account for more than 90 percent of Iraq’s state revenue, and the government is focused on rebuilding the economy while preparing for parliamentary elections later this year. Since his election in 2022, Prime Minister Al-Sudani has worked to regain the confidence of international investors. This includes offering better contract terms for international oil companies than previous agreements.
Al-Sudani has also engaged in diplomatic efforts, including a visit to Washington, although with limited success. Despite this, some U.S. companies are cautiously re-entering Iraq’s energy sector. Notably, France’s TotalEnergies signed a significant $27 billion deal for multiple energy projects in the country. Additionally, BP of the UK has signed a memorandum of understanding to help develop and rehabilitate four oilfields in Kirkuk operated by the North Oil Company.
Iraq’s upcoming parliamentary elections, scheduled for next year, will likely have a significant impact on the country’s oil industry and broader economic recovery.
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