Petroleum industry in Iraq

Iraq was the world’s 12th largest oil producer in 2009, and has the world’s fifth largest proven petroleum reserves after Venezuela, Saudi Arabia, Canada, and Iran. Just a fraction of Iraq’s known fields are in development, and Iraq may be one of the few places left where vast reserves, proven and unknown, have barely been exploited. Iraq’s energy sector is heavily based upon oil, with approximately 94 percent of its energy needs met with petroleum. In addition, crude oil export revenues accounted for over two-thirds of GDP in 2009. Iraq’s oil sector has suffered over the past several decades from sanctions and wars, and its oil infrastructure is in need of modernization and investment. As of June 30, 2010, the United States had allocated $2.05 billion to the Iraqi oil and gas sector to begin this modernization, but ended its direct involvement as of the first quarter of 2008. According to reports by various U.S. government agencies, multilateral institutions and other international organizations, long-term Iraq reconstruction costs could reach $100 billion or higher.[2]


Early History: The Ottoman Empire

In ancient times Plutarch wrote of oil bubbling from the ground near Kirkuk, but oil exploration in the region did not begin until the 20th century. While Britain explored for petroleum in Persia, the Ottoman Sultan Abdul Hamid II was surveying Mesopotamia province, where present day Iraq is located. The bitumen wells found in Mesopotamia's Mosul Vilayet, Kirkuk region and Baghdad Vilayet were reportedly so rich that pools of petroleum could be seen at the surface.[4]

In the years leading up to the First World War Britain, Germany and Russia maneuvered to increase their influence in the Ottoman Empire. The Western Powers sought railway concessions that would allow companies to exploit all mineral resources, including oil, within 20 kilometers of the tracks.[5] The Anatolian Railway Company, controlled by Deutsche Bank, had been granted one of these concessions to build a railway from Berlin to Baghdad, and were trying to secure funding for the project. Initially, certain influential persons such as British prime minister Arthur Balfour and foreign secretary Henry Petty-Fitzmaurice supported proposals to provide loans to finance the Baghdad railway, but were compelled to withdraw British support under pressure from the press, Parliament and the anti-German Colonial Secretary Joseph Chamberlain.[6] Only one week after Deutsche Bank's Anatolia Railway Company was granted a concession in 1904, William Knox D'Arcy sent a letter to the Sultan seeking a concession in Mosul and Baghdad. By 1906, it was clear that the Ottoman Civile Liste intended to withdraw from the concession agreement with the Germans, formally ending negotiations with Anatolian Railway in 1907. Negotiations between D'Arcy and the Ottoman Empire continued through 1907, with the Ottoman Empire only willing to offer D'Arcy a 9 month concession, which he declined. After Burmah Oil struck oil in Iran at Masjid-i-Suleiman, D'Arcy's fortunes changed and he became director of the newly created Anglo-Persian Oil Company. However, securing the rights to Mesopotamia's oil proved elusive.[4]

The issue of Mesopotamian oil remained unresolved and was further complicated in 1908 when the Committee of Union and Progress formed out of various Turkish dissident groups in Greece. Under pressure from these "Young Turks", the Sultan reintroduced Midhat Pasha's Constitution of 1876 in July 1908, marking the beginning of the Second Constitutional Period of the Ottoman Empire. Paul Rohrbach wrote that "The Young Turkish liberalism showed in the beginning a decided leaning toward a certain form of Anglomania."[7] Around the same time, Austria-Hungary invaded Bosnia and Herzegovina. Some researchers believe Germany's declining reputation in Istanbul following these events negatively impacted Germany's negotiations with the Turkish government concerning the Baghdad railway and related interests.[4][7] In 1909, the pro-German publication Osmanicher Lloyd accused Hüseyin Hilmi Pasha of favoring British interests. The deputy of Baghdad opposed a CUP-backed proposal to merge the state-owned Turkish steamboat company with the British Euphrates and Tigris Steam Navigation Company Limited because he believed it would advance British ambitions in Iraq. Similar complaints were made by other deputies from the Arab provinces of the Ottoman Empire.[8]

Turkish Petroleum Company

In 1909 the Sultan was deposed and replaced by Mehmed V in what came to be called the 31 March Incident. That same year the National Bank of Turkey was founded by three British financiers: Ernest Cassel, Alexander Henderson and Edward Baring. British Foreign Secretary Edward Grey described it as "an independent British financial interest in Constantinople".[4][10] The bank became the largest shareholder in the newly formed Turkish Petroleum Company (TPC), holding a 50% stake, while Deutsche Bank and Royal Dutch Shell each held 25% of the company. After Anglo-Persian Oil took over the Turkish National Bank's interest, Calouste Gulbenkian was given a 5% share — 2.5% from D'Arcy and 2.5% from Anglo-Saxon Oil.[11] Gulbenkian, who had owned 30% of the Turkish National Bank, was an Ottoman Armenian and naturalized British subject who started his career in a Baku-based oil company. He later moved to London to work for Frederick S. Lane, who was in charge of managing the Rothschild family's oil interests.[9] The TPC shareholders agreed that all oil production in the Ottoman Empire would be handled through the company, except Persia, Kuwait and some areas along the Ottoman-Persian border. On June 28, 1914 the Grand Vizier of the Ottoman Empire, Said Halim, granted a concession to the Turkish Petroleum Company for the provinces of Mosul and Baghdad, but the cooperation between Britain and Germany ended abruptly when the Austrian Archduke Franz Ferdinand was assassinated in Sarajevo by a Serbian nationalist, marking the beginning of the First World War.[5]

Aftermath of World War I

Beginning in 1919, the Standard Oil Company of New York (Socony) began to press for increased influence in Mandatory Palestine, while Herbert Hoover and Charles Evans Hughes sought to undermine British dominance in the territory that would soon become the Kingdom of Iraq.[12] On April 24, 1920 the French and British signed the San Remo Oil Agreement which transferred Deutsche Bank's 25% interest in TPC to France.[11]

The first attempt to partition the Ottoman Empire under the terms of the Treaty of Sèvres failed after Mustafa Kemal Atatürk's forces prevailed in the Turkish War of Independence. One point of dispute which remained unresolved under the subsequent Treaty of Lausanne was the Mosul Question.[13] The dispute was submitted to the League of Nations in 1924, and Turkey and Britain used census figures to present their claims within the self-determination framework. In the end, after lengthy inquiries, the League of Nations resolved that the question of self-determination could not easily be resolved by simplistic identity politics. Though acknowledging that "from the legal point of view the disputed territory must be regarded as an integral part of Turkey until that Power renounces her rights", the Commission determined that the British proposal was more strategically sound.[14]

The Iraqi government refused to recognize the pre-War concession granted to TPC, a move which was supported by the US. The government recognized the concession in 1925, only after the British threatened to separate Mosul from Iraq. The Ottoman era agreement gave Britain exclusive oil exploration rights in most of Iraq for 75 years. The Iraqi government had been promised a 20% stake at the San Remo Conference, and several prominent Iraqi ministers resigned because the earlier concession did not honor this arrangement. Instead, the company was paid 4 gold shillings per ton of crude oil.[11][15]

Meanwhile, Anglo-French cooperation at San Remo had undermined American efforts to advance their Open Door Policy and it took nearly seven years of negotiations for American interests to receive a share in the Turkish Petroleum Company.[12] On July 31, 1928, under the terms of the Red Line Agreement, the American Near East Development Corporation (NEDC) received a 23.75% stake, reducing Anglo-Persian Oil's stake to 23.75%.[11] TPC shares were held in the following proportions: 23.75% each to the Anglo-Persian Oil Company, Royal Dutch Shell, Compagnie Française des Pétroles (CFP), and the NEDC; the remaining 5% went to Calouste Gulbenkian. Membership in the NEDC varied, but by the mid 1930s Standard Oil of New Jersey and SoconyVacuum Oil (today Exxon and Mobil) were the only remaining partners.[5]

Iraqi Petroleum Company

In 1929, TPC was renamed the Iraqi Petroleum Company (IPC). IPC was created to prevent the members from competing with each other — the companies were only allowed to act through IPC when negotiating for concessionary rights with the Arab governments. IPC controlled all oil production in the Middle East until the Saudi Arabian concession to the Arabian American Oil Company (ARAMCO) in 1933.[16][17] By 1938, IPC and its subsidiaries had concessions covering almost all of the Iraq's territory, except Khanaqin — a "transferred territory" on the Iraqi side of the Iran-Iraq border.[11][18]

Following the creation of the State of Israel the Iraq-Haifa pipeline was shut down, and in its place a new line was built from Kirkuk to the Syrian Mediterranean port of Baniyas.[19]

By 1949, the Iraqi government was demanding more favorable terms that would be comparable with the royalty payments received by Iran, Saudi Arabia and Kuwait. Nationalist and left-wing papers blamed Iraq's leaders for failing to negotiate more advantageous terms with the foreign oil companies. In 1950, IPC increased the royalty paid to the Iraqi government from 4 gold shillings to 6 gold shillings, but several disputes between IPC and the Iraqi government persisted, including a disagreement over the price of gold. Stephen Hemsley Longrigg wrote that "the sums at stake in the controversy were all the greater, since the wartime price of gold in Middle Eastern bazaars had far exceeded—had doubled or trebled—the 'Bank of England price,' upon which companies based their calculations: if gold were to mean the sterling equivalent of gold sovereigns, according to the Baghdad money-changers tariff, the Company's outstanding debt was formidable".[11][18]

Iraq's position was strengthened after Muhammad Mossadegh nationalized the Iranian oil industry; because the British responded by boycotting Iranian oil, their dependence on Iraqi oil increased. Meanwhile, the nationalist Istiqlal Party began to demand nationalization of the Iraqi oil industry and both the American and British governments wanted IPC to offer generous terms to reach a settlement with the Iraqis. Iraq was offered 50% of the companies' oil profits, but the Iraqis wanted 25% of the payment in free oil. An agreement was finally reached that Iraqis would receive 12.5% of total production as payment in kind, in addition to the profit sharing arrangement.[18][19]

Nationalist Revolution

There were two major factors that threatened the status quo in the late 1950s: rising Arab nationalism and increasing demand for oil. The British and French invasion of the Suez in 1956 damaged Britain's standing in the Middle East and also negatively impacted Anglo-American relations. While most of Britian's attention during this turbulent period had focused on securing transportation routes in the wake of Gamal Abdel Nasser's growing popularity in Egypt, the Iraqi Revolution of 1958 that overthrew King Faisal II of Iraq directly threatened supply.[20]

The new regime, led by Abd al-Karim Qasim, initially had British support but was threatened by pro-Nasserite factions. While the British opposed these pro-Nasserite elements in Iraq, the United States supported them. The new Iraqi regime was opposed to Nasser's United Arab Republic and prevailed against pro-Nasserite forces in the 1959 Mosul uprising. That same year, Qasim sought to renegotiate the terms of IPC's concessionary agreements, but as he did not have the capacity to transport his oil to market British officials did not think nationalization of IPC was likely.[21][22]

OPEC was created in September 1960, after oil companies cut the posted price they paid to the governments of oil producing countries during an oil glut; Iraq was one of the founding members.[20] In 1961, Kurdish tribal leader Mullah Mustafa Barzani rose up again Qasim's government in the First Iraqi–Kurdish War. Kurds attacked IPC infrastructure, demonstrating that Qasim was unable to provide security around the Mosul and Kirkuk regions. Britain wanted to continue purchasing Iraqi oil with sterling; the Ministry of Power estimated that "without a sterling base of supply in the Middle East, we estimate that the dollar bill could be increased by something of the order of £400 million a year". However, relations between Qasim and IPC continued to deteriorate and in 1961, Public Law 80 was passed nationalizing at least 95% of IPC's concessions. By 1962 the British had come to agree with the Americans' anti-Qasim stance and withdrew their support for Qasim's regime.[22][23]

Baathist Iraq

During the oil glut of the 1960s, oil companies limited Iraqi production to prevent a decrease in the price of oil.[24] The Iraq National Oil Company was created and empowered to develop the assets seized from IPC under Law 80. This arrangement continued in 1970 when the government demanded even more control over IPC, eventually nationalizing IPC after negotiations between the company and the government broke down. By this time the Ba'ath Party was in power in Iraq and Saddam Hussein was its de facto ruler, although Ahmed Hassan al-Bakr did not formally step down as President until 1979.[23][25] One wrıter descrıbed IPC's nationalization as Hussein's "gateway to fame".[24]

Iraq War and Post-War developments

In April 2003 the United States created the Coalition Provisional Authority (CPA) as the first of a series of transitional governments following the 2003 invasion of Iraq. The CPA started the process of De-Ba'athification by issuing CPA Orders 1 and 2. The Iraqi Governing Council (IGC) was established in pursuit of a policy that representation in government would be apportioned on the basis of ethnic identity. This "quota system" based on identity politics was strongly supported by the Kurdish faction. The IGC backed Ayatollah Ali Sistani's position that the Iraqi Constitution could not be written before elections were held. The Transitional Administrative Law (TAL) — also called the "interim constitution — included a proposal for caucuses to select the transitional assembly; this was opposed by Sistani, who wanted direct elections. Sistani also had reservations about the sectarian structure of government that created a three-person "collective presidency" whose composition was fixed on ethnic grounds;one Kurd, one Sunni Arab and one Shi'a Arab would serve on the three person council, which Sistani said had been "rejected by the majority of the people".[26]

In February 2007, the Iraqi cabinet approved a draft law that would distribute oil revenues to the various regions and provinces of Iraq based on population, and would also give regional oil companies the authority to enter into contractual arrangements directly with foreign companies concerning the exploration and development of oil fields. Iraqis remained divided over provisions allowing regional governments to enter into contracts directly with foreign companies; while strongly supported by Kurds, Sunni Arabs wanted the Oil Ministry to retain signing power. As a compromise the draft law proposed that a new body called the Federal Oil and Gas Council would be created that could, in some circumstances, prevent execution of contracts signed by regional governments.[27] This arrangement would undo the nationalization of the Iraqi oil industry that dates back to 1972.

Under Article I of the 2010 Law of Income Taxation on Foreign Oil Companies Working in Iraq, there is a 35% tax on "income earned in Iraq from the contracts signed with the Foreign Oil Companies, their subsidiaries, branches, or offices and their subcontractors working in Iraq in the field of oil and gas extraction and production and the relevant industries". The production contracts, which foreign oil companies enter into with the Iraqi federal or regional governments, often include revenue-sharing terms as well.[28][29]




See: Oil reserves in Iraq

According to the Oil and Gas Journal, Iraq’s proven oil reserves are 115 billion barrels, although these statistics have not been revised since 2001 and are largely based on 2-D seismic data from nearly three decades ago. Geologists and consultants have estimated that relatively unexplored territory in the western and southern deserts may contain an estimated additional 45 to 100 billion barrels (bbls) of recoverable oil. Iraqi Oil Minister Hussain al-Shahristani said that Iraq is re-evaluating its estimate of proven oil reserves, and expects to revise them upwards. A major challenge to Iraq’s development of the oil sector is that resources are not evenly divided across sectarian-demographic lines. Most known hydrocarbon resources are concentrated in the Shiite areas of the south and the ethnically Kurdish north, with few resources in control of the Sunni minority. The majority of the known oil and gas reserves in Iraq form a belt that runs along the eastern edge of the country. Iraq has 9 fields that are considered super giants (over 5 billion bbls) as well as 22 known giant fields (over 1 billion bbls). According to independent consultants, the cluster of super-giant fields of southeastern Iraq forms the largest known concentration of such fields in the world and accounts for 70 to 80 percent of the country’s proven oil reserves. An estimated 20 percent of oil reserves are in the north of Iraq, near Kirkuk, Mosul and Khanaqin. Control over rights to reserves is a source of controversy between the ethnic Kurds and other groups in the area.[30]


In 2009, Iraq’s crude oil production averaged 2.4 million barrels per day (mbd), about the same as 2008 levels, and below its pre-war production capacity level of 2.8 million mbd After the end of the US invasion the production increased on a high level, even though a new invasion from the so-called ISIL started. Production in March 2016 stood at 4.55 million barrels a day. Which seems to will become a new all-time peak year for Iraq if OPEC talks about freezing or reduce production held in April 2016 will not led to a reduction. The old peak was 1979 with 171.6 million tons of oil compared to 136.9 million tons produced in 2011 and 152.4 million tons in 2012.[31][32] The company’s geographical operation area spans the following governorates: Kirkuk, Nineveh, Irbil, Baghdad, Province and part of Governorate to Hilla and Iraq to Kut. The remainder falls under the jurisdiction of the SOC and MOC, and though smaller in geographical size, includes the majority of proven reserves. MOC's oil fields hold an estimated 30 billion barrels of reserves. They include Amarah, Field, Huwaiza, Noor, Rifaee, Dijaila, Kumait and East Rafidain.[33]

A 2012 report by the International Energy Agency estimated that Iraq could increase production from 2.95 mbd in 2012 to 6.1 mbd by 2020, which would increase Iraq's oil revenues to $5 trillion between 2012 and 2035, or around $200 billion per year.[28]

Development plans

Iraq has begun an ambitious development program to develop its oil fields and to increase its oil production. Passage of the proposed Hydrocarbons Law, which would provide a legal framework for investment in the hydrocarbon sector, remains a main policy objective. Despite the absence of the Hydrocarbons Law, the Ministry of Oil (Iraq) signed 12 long-term contracts between November 2008 and May 2010 with international oil companies to develop 14 oil fields. Under the first phase, companies bid to further develop 6 giant oil fields that were already producing with proven oil reserves of over 43 billion barrels. Phase two contracts were signed to develop oil fields that were already explored but not fully developed or producing commercially. Together, these contracts cover oil fields with proven reserves of over 60 billion barrels, or more than half of Iraq’s current proven oil reserves. As a result of these contract awards, Iraq expects to boost production by 200,000 bbl/d by the end of 2010, and to increase production capacity by an additional 400,000 bbl/d by the end of 2011. When these fields are fully developed, they will increase total Iraqi production capacity to almost 12 million bbl/d, or 9.6 million bbl/d above current production levels. The contracts call for Iraq to reach this production target by 2017..

Infrastructure constraints

Iraq faces many challenges in meeting this timetable. One of the most significant is the lack of an outlet for significant increases in crude oil production. Both Iraqi refining and export infrastructure are currently bottlenecks and need to be upgraded to process much more crude oil. Iraqi oil exports are currently running at near full capacity in the south, while export capacity in the north has been restricted by sabotage, and would need to be expanded in any case to export significantly higher volumes. Production increases of the scale planned will also require substantial increases in natural gas and/or water injection to maintain oil reservoir pressure and boost oil production.

Iraq has associated gas that could be used, but it is currently being flared. Another option is to use water for re-injection, and locally available water is currently being used in the south of Iraq. However, fresh water is an important commodity in the Middle East, and large amounts of seawater will likely have to be pumped in via pipelines that have yet to be built. ExxonMobil has coordinated initial studies at water injection plans for many of the fields under development. According to their estimate, 10 -15 million bbl/d of seawater could be necessary for Iraq’s expansion plans, at a cost of over $10 billion.

Furthermore, Iraq’s oil and gas industry is the largest industrial customer of electricity, with over 10 percent of total demand. Large-scale increases in oil production would also require large increases in power generation. However, Iraq has struggled to keep up with the demand for power, with shortages common across Iraq. Significant upgrades to the electricity sector would be needed to supply additional power. Iraq also plans to sign delineation agreements on shared oil fields with Kuwait and Iran. Iraq would like to set up joint committees with its neighbors on how to share the oil. According to the Oil and Gas Journal, Iraq’s proven natural gas reserves are 112 trillion cubic feet (Tcf), the tenth largest in the world. An estimated 70 percent of these lie in Basra governorate in the south of Iraq. Probable Iraqi reserves have been estimated at 275-300 Tcf, and work is currently underway by several IOCs and independents to accurately update hydrocarbon reserve numbers. Two-thirds of Iraq’s natural gas resources are associated with oil fields including, Kirkuk, as well as the southern Nahr Bin) Umar, Majnoon, Halfaya, Nassiriya, the Rumaila fields, West Al-Qurnah, and Zubair. Just under 20 percent of known gas reserves are non-associated; around 10 percent is salt dome gas. The majority of non-associated reserves are concentrated in several fields in the North including: Ajil, Bai Hassan, Jambur, Chemchemal, Kor Mor, Khashem al-Ahmar, and Khashem al-Ahmar.

Service contracts licensing results
Field / Block Company Home country Company type Share in field Plateau production target (bpd) Service fee per bbl ($) Gross revenue at plateau ($/yr)
Majnoon Shell Netherlands Public 45% 1,800,000 1.39 410,953,500
Majnoon Petronas Malaysia State 30% 1,800,000 1.39 273,969,000
Halfaya CNPC China State 37.5% 535,000 1.4 102,519,375
Halfaya Petronas Malaysia State 18.75% 535,000 1.4 51,259,688
Halfaya Total France Public 18.75% 535,000 1.4 51,259,688
Rumaila BP UK Public 37.5% 2,850,000 2 780,187,500
Rumaila CNPC China State 37.5% 2,850,000 2 780,187,500
Zubair ENI Italy Public 37.81% 1,200,000 2 287,415,600
Zubair Occidental US Public 23.44% 1,200,000 2 205,334,400
Zubair KOGAS Korea State 18.75% 1,200,000 2 164,250,000
West Qurna Field Phase 2 Lukoil Russia Public 75% 1,800,000 1.15 566,662,500
Badra Gazprom Russia State 30% 170,000 5.5 102,382,500
Badra Petronas Malaysia State 15% 170,000 5.5 51,191,250
Badra KOGAS Korea State 22.5% 170,000 5.5 76,786,875
Badra TPAO Turkey State 7.5% 170,000 5.5 25,595,625
West Qurna Field Phase 1 Exxon US Public 60% 2,325,000 1.9 967,432,500
West Qurna Field Phase 1 Shell Netherlands Public 15% 2,325,000 1.9 241,858,125
Qayara Sonangol Angola State 75% 120,000 5 164,250,000
Najmah Sonangol Angola State 75% 110,000 6 180,675,000
Garraf Petronas Malaysia State 40% 230,000 1.49 56,288,475
Garraf JAPEX Japan Public 30% 230,000 1.49 37,525,650
Missan Group CNOOC China State 63.75% 450,000 2.30 240,831,562.5
Missan Group TPAO Turkey State 11.25% 450,000 2.30 42,499,687.5

Notes: 1. Field shares are as a % of the total. The Iraq state retains a 25% share in all fields for which Service Contracts have been awarded.


Export pipelines

To the North: Iraq has one major crude oil export pipeline, the Kirkuk-Ceyhan Oil Pipeline, which transports oil from the north of Iraq to the Turkish port of Ceyhan.This pipeline has been subject to repeated disruptions this decade, limiting exports from the northern fields. Iraq signed an agreement with Turkey to extend the operation of the 1.6 million bbl/d pipeline, as well as to upgrade its capacity by 1 million bbl/d. In order for this pipeline to reach its design capacity, Iraq would need to receive oil from the south via the Strategic Pipeline, which was designed to allow flows of crude oil from the south of Iraq to go north via Turkey, and vice versa. Iraq has proposed building a new strategic line from Basra to the northern city of Kirkuk, with the line consisting of two additional crude oil pipelines. To the West: The Kirkuk-Banias Oil Pipeline has been closed and the Iraqi portion reported unusable since the 2003 war in Iraq. Discussions were held between Iraqi and Syrian government officials to re-open the pipeline, which had a design capacity of 700,000 bbl/d, although actual volumes never reached this level. The Russian company Stroytransgaz accepted an offer to fix the pipeline in December 2007, but no follow-up was made. Iraq and Syria have discussed building several new pipelines, including a 1.5 million bbl/d pipeline carrying heavy crude oil, and a 1.25 million bbl/d pipeline for carrying light crudes. To the South: The 1.65 million bbl/d Iraq Pipeline to Saudi Arabia (IPSA) has been closed since 1991 following the Persian Gulf War. There are no plans to reopen this line. Iraq has also held discussions to build a crude oil pipeline from Haditha to Jordan’s port of Aqaba.


The Basra Oil Terminal on the Persian Gulf has an effective capacity to load 1.3 million bbl/d and support Very Large Crude Carriers. In February 2009, the South Oil Company commissioned Foster Wheeler to carry out the basic engineering design to rehabilitate and expand capacity of the terminal by building four single point mooring systems with a capacity of 800,000 bbl/d each. According to former Minister of Oil Issam al-Chalabi, it would take at least until 2013 to complete the project if financing is found. There are five smaller ports on the Persian Gulf, all functioning at less than full capacity, including the Khor al-Amaya terminal.

Overland export routes

Overland routes are used to export limited amounts of crude from small fields bordering Syria. In addition, Iraq has resumed shipping oil to Jordan’s Zarqa refinery by road tankers at a rate of 10,000 bbl/d.


Estimates of Iraqi nameplate refining capacity vary, from 637,500 bbl/d according to the Oil and Gas Journal to 790,000 bbl/d according to the Special Inspector General for Iraqi Reconstruction. Iraqi refineries have antiquated infrastructure and only half run at utilization rates of 50 percent or more. Despite improvements in recent years, the sector has not been able to meet domestic demand of about 600,000 bbl/d, and the refineries produce too much heavy fuel oil and not enough other refined products. As a result, Iraq relies on imports for 30 percent of its gasoline and 17 percent of its LPG. To alleviate product shortages, Iraq’s 10-year strategic plan for 2008-2017 set a goal of increasing refining capacity to 1.5 million bbl/d, and is seeking $20 billion in investments to achieve this target. Iraq has plans for 4 new refineries, as well as plans for expanding the existing Daura and Basra refineries.

Natural gas


Gas production

Iraqi natural gas production rose from to 81 (billion) Bcf in 2003 to 522 Bcf in 2008. Some is used as fuel for power generation, and some is re-injected to enhance oil recovery. Over 40 percent of the production in 2008 was flared due to a lack of sufficient infrastructure to utilize it for consumption and export, although Royal Dutch Shell estimated that flaring losses were even greater at 1 Bcf per day. As a result, Iraq’s five natural gas processing plants, which can process over 773 billion cubic feet per year, sit mostly idle. To reduce flaring, Iraq has been working on an agreement with Royal Dutch Shell to implement a 25-year project to capture flared gas and provide it for domestic use. Iraq’s cabinet gave preliminary approval for the $17 billion deal covering development of 25 – 30 Tcf of associated natural gas reserves in Basra province through a new joint venture, Basra Gas Company. The agreement, which originally was to cover all of Basra province, has been modified to include only the associated gas from the Rumaila, Zubair, and West Qurna Phase I projects. Implementation of this agreement is necessary for the new oil development projects to go forward.

Upstream development

Iraq has planned an upstream bidding round in late 2010 for three non-associated natural gas fields with combined reserves of over 7.5 Tcf. This will be the third hydrocarbon bidding round conducted by Iraq, following two earlier rounds that were held to develop Iraq’s oil fields. All of the companies that prequalified to bid in the two earlier rounds will be invited. Iraq has committed to purchasing 100 percent of the gas.


Plans to export natural gas remain controversial due to the amount of idle and sub-optimally fired electricity generation capacity in Iraq - much a result of a lack of adequate gas feedstock. Prior to the 1990-1991 Gulf War, Iraq exported natural gas to Kuwait. The gas came from Rumaila through a 105-mile, 400-MMcf/d pipeline to Kuwait's central processing center at Kuwait. In 2007, the Ministry of Oil announced an agreement to fund a feasibility study on the revival of the mothballed pipeline. Iraq has eyed northern export routes such as the proposed Nabucco pipeline through Turkey to Europe, and in July 2009 Prime Minister Nouri al-Malikie suggested that Iraq could be exporting 530 Bcf per year to Europe by 2015. A second option is the Arab Gas Pipeline (AGP) project. The proposed AGP pipeline would deliver gas from Iraq’s Akkas field to Syria and then on to Lebanon and the Turkish border sometime in 2010, and then on to Europe. Other proposals have included building LNG exporting facilities in the Basra region.

Environmental cleanup

Sites that have been contaminated with crude oil, either by illegal disposal of oil waste or accidental spills, may be cleaned up by chemical, physical and thermal methods. Another option being explored by researchers is the use of biological microorganisms such as bacteria, algae, yeast and fungi which may be able to degrade hydrocarbons. Studies have identified several fungi species of interest including Rhizopus, Paecilomyces, Torulopsis, Pleurotus, Alternaria, Mucor, Talaromyces, Gliocladium, Fusarium, Rhodotorula, Cephalosporium,Cladosporium, Geotrichum, Aspergillus, and Penicillium. Researchers have also started to study indigenous fungi from polluted sites at the Rumaila oil field in Iraq.[34]

See also


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