Iraq Aims to Ramp Up Oil and Gas Output Amid Challenges
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Loading... - Beatrice Abate
- 26 Aug 2024
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Iraq’s upstream oil and gas sector is experiencing rapid transformation, with significant investments being directed toward boosting production. Despite these efforts, challenges related to infrastructure, investment, and exploration persist, according to a recent report by Wood Mackenzie titled "Iraq’s Upstream Opportunities: A Review."
The report suggests that Iraq's gas output could more than double to 4.4 billion cubic feet per day (bcfd) by 2030, and oil production could reach 5.5 million barrels per day (b/d) within the same period. Alexandre Araman, director at Wood Mackenzie, noted that Iraq's upstream industry is undergoing dramatic changes with increasing corporate interest and numerous entry opportunities of scale. He highlighted that many of the major oil companies are re-evaluating their presence in Iraq due to historically punitive fiscal terms, which have offered low returns, with new interest coming from state-backed players in Southeast Asia and China.
Much of Iraq's potential growth is expected to come from large oil fields in the southern part of the country, including Rumaila, West Qurna, Zubair, and Majnoon. However, significant challenges remain, particularly regarding infrastructure. Araman pointed out that current export pipelines, terminals, and water injection capacity are insufficient to support the desired increase in production. Additionally, Iraq’s fiscal terms have been a barrier to foreign investment and exploration, with only five exploration wells drilled in Federal Iraq since 2013, despite the country holding over 150 billion barrels of oil resources.
Nevertheless, the recent 2024 licensing rounds attracted considerable interest from Chinese firms, reflecting the growing interest from Asian-based investors. This shift illustrates how Iraq’s corporate ecosystem has evolved, with more players from diverse geographies, particularly Asia, being drawn to the country's upstream opportunities. However, much of this attention has been focused on discovered resources rather than exploration potential.
Araman emphasized that Iraq’s fiscal terms remain among the least competitive in the Middle East, and more needs to be done to boost exploration interest. If fiscal terms are improved, Iraq could see more activity from Asian players as the corporate landscape continues to shift from West to East. Improved fiscal conditions and critical infrastructure could open up opportunities for increased mergers and acquisitions (M&A) activity and future production growth.
Iraq’s ambitious targets include doubling gas production, eliminating flaring, and ending reliance on imports. Backed by 100 trillion cubic feet (tcf) of resources and political will, these targets present new investment opportunities. Araman noted that due to the nature of Iraq’s fiscal terms, some gas opportunities are more commercially attractive than oil development, prompting major players to shift their focus towards gas-focused projects.
