Iraq’s Oil Ministry has repeatedly recognized the country’s untapped oil reserves and the potential to increase production. Recently, Ali Maarij, an Undersecretary in the ministry, proposed that Iraq could raise its oil output to 7 million barrels per day (bpd) within the next five years. He also suggested that with a strategic shift, Iraq could increase production to 12-13 million bpd within the same timeframe. However, the question remains: How feasible is this, and what hurdles stand in the way?
In 2012, then-Prime Minister Nouri al-Maliki received a confidential report outlining Iraq’s oil production potential. The report, part of the “Integrated National Energy Strategy” (INES), projected that Iraq could increase its oil output from just over 3 million bpd to 13 million bpd by 2017 under a “High Production” scenario. A more moderate “Medium Production” scenario set a goal of 9 million bpd by 2020, while a “Low Production” forecast aimed for 6 million bpd by 2025. This comprehensive study, funded by the World Bank and supported by consultants from Booz & Company, confirmed that Iraq’s true oil reserves were much higher than previously thought.
Officially, Iraq has 145 billion barrels of proved crude oil reserves, ranking fifth globally. However, experts believe that the country likely has much more oil. In 2010, the Oil Ministry estimated that Iraq’s undiscovered resources amounted to an additional 215 billion barrels, a figure supported by a 1997 study from Petrolog, a respected oil and gas firm. Importantly, this estimate did not include the semi-autonomous Kurdistan region. The International Energy Agency (IEA) later concluded that Iraq’s total recoverable resources, including Kurdistan, could be as high as 246 billion barrels, combining crude oil and natural gas liquids.
Iraq’s potential is further enhanced by its low production costs, which are among the lowest in the world—on par with Saudi Arabia and Iran, at just $1-2 per barrel. The key to unlocking this potential, according to the INES and IEA reports, revolves around three main strategies:
Prioritize the development of Iraq’s ‘Big Four’ oil fields—West Qurna, Rumaila, Zubair, and Majnoon—currently responsible for about 75% of Iraq’s oil production growth.
Expedite the Common Seawater Supply Project (CSSP), which involves transporting seawater from the Persian Gulf to oil reservoirs to maintain pressure and extend field longevity.
Strengthen infrastructure by ensuring that the pipelines and wellheads are built with clear financial objectives and efficient management.
However, implementing these plans has proven challenging. The first major setback occurred when Iraq’s government sought to secure ExxonMobil’s involvement in the CSSP. While negotiations were initially successful in 2015, ExxonMobil later withdrew in 2018, citing unbalanced risk-reward terms in the contract. Key issues included concerns over cohesion, security, and the management of the project. ExxonMobil sought transparency, requiring the involvement of U.S. lawyers, auditors, and consultants to oversee the project’s execution, ensuring that operations aligned with international standards.
ExxonMobil’s decision to withdraw sheds light on the broader issue of corruption in Iraq. According to Transparency International, Iraq has long been one of the world’s most corrupt nations, plagued by embezzlement, bribery, and political interference. These issues have undermined Iraq’s ability to effectively manage oil contracts and infrastructure projects, creating a risky environment for international companies.
Despite these setbacks, Iraq has made progress with other international energy firms. French oil giant TotalEnergies is now taking the lead on the CSSP, following a landmark $27 billion deal in 2022. This agreement includes work on oil and gas fields and initiatives to reduce gas flaring. However, TotalEnergies initially hesitated, citing concerns over the potential resurrection of the Iraqi National Oil Company (INOC), a notoriously corrupt entity. After making it clear that it would not proceed under such conditions, TotalEnergies was able to secure a more favorable agreement.
Iraq’s ability to unlock its full oil production potential depends on overcoming its governance and corruption challenges. If Iraq can ensure transparency and stability, it may realize a significant boost in its oil output, potentially reaching production levels that could change the global energy landscape. The path forward remains uncertain, but with strategic adjustments, Iraq could transform its oil industry and become a much larger player in global markets.
Related Topics:
- Exxon and Oxy Lead US Shale Rankings
- Oil Prices Fall Following Gaza Ceasefire Deal and Higher OPEC Production Data
- Opec Expects 1.4 Million B/d Increase In Oil Demand By 2026