Iraq has surpassed Iran to become the fourth largest oil producer in the world, an amazing improvement from 12th place a decade ago.
Domestic oil consumption has soared nearly 50% since 2010 to ~830,000 b/d.
Thus, Iraq has a 0.87 gallons per person per day oil consumption rate (very high for a poorer country), compared to the 0.40 gallon rate for China and 2.65 gallons for the U.S.
Yet still, Iraq produces nearly six times more oil than it needs to satisfy the domestic requirement, so the availability of exports is strong.
This surplus will remain essential for a country mired in conflict for decades: oil exports are some 90% of Iraq’s total government revenue, one of the most overly oil dependent nations in the world.
Iraq is OPEC’s second largest oil producer (after Saudi Arabia) and stands fifth globally in proven petroleum reserves.
Iraq now has 150 billion barrels of proven reserves, 9% of the global total and up 33% from two decades ago. Yet, the potential resource could be many times that.
Under the control of the central government in Baghdad, the onshore southern part of Iraq accounts for 90% of the country’s production.
The rest comes from oil fields in northern Iraq, mostly operated by the Kurdistan Regional Government (KRG).
But Iraq has been successful in expanding reserves and growing production via partnerships with global oil giants, such as BP, Shell, Lukoil, and ExxonMobil, helping to develop the countries neglected fields.
Midstream upgrades, higher fees for growing production, and better oil quality have all helped.
Operational and political efficiency have surely improved: the breakeven fiscal oil price for Iraq has fallen to about $50 this year, plummeting from $122 back in 2013.
In October, Baghdad transferred the ownership of nine state-held oil companies into the newly formed National Oil Company, to manage upstream operations.
Long exempt from the organization’s production cuts to increase prices, the oil rebound in Iraq is now under pressure from OPEC to cut back.
This, however, is no easy chore for a country that has long been producing at full throttle.
Critical oil revenues rebuild aged and damaged infrastructure, help simmer domestic unrest, and, perhaps most importantly, keep foreign producers content.
Indeed, Iraq’s oil industry is far more reliant on investment from outside producers than the other OPEC members: international oil companies account for nearly 60-70% of production.
Reducing domestic output in Iraq is therefore more complex, with leadership concerned about risking access to foreign investment and technology.
As such, if Iraq wants to heed to OPEC, it would probably push domestic producers to comply with reductions.
Lagging export infrastructure, tiny profit margins, and political strife are just a few of the problems Iraq’s oil industry faces.
The citizenry claims chronic electricity shortages, high jobless rates, and insufficient clean water as more vital than increased oil output.
Per year, the average Iraqi makes $5,500, less than half of the Middle Eastern average.
And not exactly enticing for more foreign partnerships, out of 180 ranked nations, Iraq is tied with Venezuela and ranked as the 12th most corrupt.
Although Iraq’s electricity crisis is dangerously giving neighbor Iran a greater role.
This is seen as a bit unrealistic, but surely to help: ExxonMobil and PetroChina are expected to sign a $53 billion megaproject with Iraq “very soon.“
And Iraq’s first offshore survey in the Gulf is in the works.
After the U.S., Iraq could see the largest incremental gain in new oil production over the next 10 years.
Ultimately, other key global producers, those that have long been over-reliant on underfunded, stagnant, and inefficient national oil companies, should take note of Iraq’s willingness to overcome some of its domestic issues by bringing in outside help to increase production.
But still, Iraq’s oil industry faces a long and winding road.