Iraq: An Oil Giant Constrained by Infrastructure & Geopolitics

With tremendous crude oil reserves rivaling, if not exceeding, those of Saudi Arabia, lowest production costs in the world and the biggest potential for capacity expansion of anywhere else, Iraq may be destined to dominate the world oil market in the second and third decades of the 21st century but only if geopolitics and infrastructure permit. This could have enormous implications for the global oil market, the price of oil and the balance of power in the Middle East. However, the development of this colossal oil wealth will require both substantial foreign investment and technical assistance and also political stability. Despite its long history as a producer, Iraq is largely untapped. Of more than eighty oilfields discovered in the country, only about twenty-one have been partially developed. Given this state of underdevelopment, it is realistic to assume that Iraq has far larger oil reserves than documented so far, probably about 200 billion barrels (bb) more. In 2009, the Iraqi government awarded the re-development contracts of 11 of the country’s oilfields to several international oil companies. The contracts target a total production of more than 11.6 million barrels a day (mbd), an increase of about 9.60 mbd over the current level of considered fields. If the re-development plans proceed as planned, Iraq’s oil production could rise from 3.00 mbd in 2013 to a projected 12.72 mbd by 2020. Iraq could thus emerge as the largest crude oil producer and also the largest export in the world. However, the fundamental problems hindering the realization of Iraqi full oil potential concern political instability, government decisions, and infrastructure development such as oil pipelines and export terminals.