Iraq's Energy Industry

Iraq: emerging from uncertainty

Iraq is the second-largest oil producer in OPEC. The country holds around 145 billion barrels of proven crude oil reserves, among the largest globally. The national oil and gas sector is overseen by the Ministry of Oil, and the government participates in E&P activities through the following state-owned entities: North Oil Company, Midland Oil Company, Dhi Qar Oil Company, Basrah Oil Company and Missan Oil Company.

Most of Iraq’s hydrocarbons are concentrated along the country’s eastern edge, near the border with Iran. The super-giant fields in the southeast near Kuwait represent the world’s greatest concentration of such finds and contain more than 70-80% of the country’s reserves, while around 20% is located in the northern region. Production is driven predominantly by Iraq’s NOCs. The country is seeking to raise output from its maturing assets, which will require water injection, including seawater conversion/injection. Iraq’s impressive gas potential has also been largely overlooked, with the country relying on gas imports to meet demand. Efforts are underway to reduce gas flaring and expand the transport infrastructure needed to support domestic gas development.

Iraq has significant refining capacity, but much of the sector’s infrastructure has become antiquated and operates at around 50% capacity. These ageing facilities produce more heavy fuel oil than refined products, creating a mismatch with domestic demand. The state has discussed imposing measures to redirect investment away from upstream activity and towards downstream development, in an effort to generate more direct economic growth.

Raising production on Iraq’s oil and gas fields will also require additional power generation capacity. The hydrocarbons industry has traditionally accounted for 10% of total energy demand in the country, a share expected to rise as output increases. Despite the resilience of Iraq’s hydrocarbons sector, political turmoil has weighed on investment in power generation. The government has taken steps to curb consumption, but further investment will be required to meet the country’s industrial targets.