Around 66 oil reserves have been discovered in Iraq, while most of it still remains unexplored. It is suspected that more discoveries of oil fields will be made in the years to come. However, with the resources lying at its feet, Iraq is unable to utilize it to its maximum potential. The global oil industry is not really pleased with Iraq’s endowment. Constant strife, lifelong war has left Iraq crippled with none of its industries flourishing. The evolution of Iraq in all sectors has been hampered due to many decades of violence and the scars are still visible.
The peak oil production by Iraq was 3.9 million barrels per day in the year 1979, till date ie. Sept. 2011. Production from Iran suffered in the 1980’s due to war and deteriorated in 1990’s by the sanctions imposed on Iraq due to its Kuwait invasion. Iraq was permitted to enter the market towards the end of 1996 with certain limitations by the UN agreement. It further suffered in 2002 by restrictions imposed on its sales. The oil production in Iraq in the year 2010 was ranked below 2.36 million barrel per day.
Iraq signed contracts with international companies to develop its oil fields and realize their full potential. This measure was vehemently opposed by many Iraqis who wanted the oil reserves to remain in national hands. The oil production however, still remains below average.
Iraq has had to import oil and gas in a large capacity as its oil refineries performed only 50 to 60 percent of their full capacity. Iraq has spent millions on plans to develop its existing refineries and make further advancements where required. These plans however only exist on paper. Iraq has instead attracted foreign companies that are not willing to deal on fair terms. It can be estimated that this scenario will remain the same in the near future.
A large part of Iraq’s oil is wasted due to flaring. Iraq’s ambition to produce up to 12.5 million barrel per day by the year 2017 is opposed by many veterans of the oil industry. They fear that the world oil demand would not increase enough to allow for consumption of oil from Iraq as well as the increased production from other countries. In such a scenario oil prices would be volatile and affected negatively. Iraq might end up spending millions of dollars on enhancing its oil resources that it may be unable to use. To avoid conflict with other oil producing nations Iraq may have to hold back as none of the nations want to destroy prices on oil. Taking Iraq’s development projects into consideration, future oil price may definitely suffer.
Although the plans to develop oil fields are on, Iraq lacks a well developed infrastructure for increased exports.
Kyles Humphreys is an experienced journalist in oil related fields, who frequently writes articles related to oil prices & indexes and crude oil including tips on investment in oil. Please visit oil.com for more details.
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