Iraq has huge oil reserves, estimated to be at around 143 billion barrels, in addition to gas reserves of about 3.2 trillion cubic meters. However, despite these massive reserves that put Iraq in the ranks of the top five oil countries worldwide, output remains relatively limited and much lower than otherwise allowed by the reserves in its possession. Official estimates forecast that the country's oil output by 2013 will be around 3.5 million barrels per day, and crude oil exports around 2.9 million barrels per day, including 250 thousand barrels per day from the Kurdistan region. This would be the highest level of production and exportation achieved in the last three decades, if these figures were truly attained. It is however already clear how difficult it will be to achieve these forecasted levels of production and exportation on schedule. Although Iraqi oil production rose to about 3.14 million barrels per day, an increase of about one million barrels per day from the levels seen before contracting with international companies, it is clear that there are many difficulties facing these companies, causing delays in their plans, or prompting them to terminate contracts with the federal ministry of oil, to seek more favorable agreements instead with the Kurdistan Regional Government (KRG). Companies face great difficulties in dealing with the Iraqi bureaucracy regarding the delays and obstruction at the level of customs formalities for the import of equipment, for the development of the fields, and in obtaining visas for foreign employees. For instance, Shell faced delays in developing the Majnoon field, to produce about 100 thousand barrels per day. The same goes for the Rumaila field operated by Britain's BP, producing around 1.35 million barrels per day. The project there was supposed to add 100 thousand barrels per day to its output. Similarly, Malaysia's Petronas faced delays in starting the production of around 50 thousand barrels per day from al-Gharraf field, which has a productive capacity of about 230 thousand barrels per day. The expected decrease in Iraq's oil output this year might result in a deficit of about $19 billion in the federal budget for 2013. Then in addition to the obstacles mentioned above, there is the security concern. For example, the Kirkuk-Ceyhan pipeline was blown up 30 times in 2013. As a result, the pipeline collapsed, and the government was forced to construct a substitute pipeline. Meanwhile, the southern provinces, home to the most important oil fields, have started considering contracting with private security companies to protect oil installations. The problem is not limited to the impeded development of the Iraqi oil industry, but also involves the manner in which oil revenues are put to use, the excessive dependence on oil with little regard for other sectors of the economy, and the prevalence of a culture of corruption. Iraqi oil plans in place seek to increase crude oil production to about 12 million barrels per day by 2017. The federal ministry of oil signed long-term technical service agreements (25 years) with major international oil companies to reach this level of production, while the KRG signed production-sharing agreements with other international companies. However, it is clear based on what has been achieved so far that production level will range from six to nine million barrels per day. Though this may be a high level for Iraq, it remains below the ambitions of the country, which had motivated contracts to develop mega oil fields with international companies over a relatively short period of time. The Iraqi oil sector faces many concerns and obstacles that hinder its natural growth, including the regime's failure to run the country's affairs with prudence and wisdom, focusing excessively on – and failing in – safeguarding security, with growing concern among politicians about terrorism, especially with al-Qaeda threatening to attack the Green Zone as it had attacked the prisons of Abu Ghraib and al-Taji. The oil sector, like other sectors, is also suffering from the lack of accord over the federal system and the conflict of interest, which has paralyzed a lot of sectors in the country. This lack of accord meant that passing the oil and gas law has been obstructed since February 2007. It also led to the emergence of two competing oil industries in the country, marred by disputes and governed by the interests of senior officials, in the absence of any attempt to reach compromises. The disputes between the two industries prevented the establishment of a national oil company that would have helped both the federal and regional ministries of oil, providing that there is a bare minimum of accord among ruling political factions over the nature of the federal system. It is worth noting here that long-term service agreements between Baghdad and international companies require joint committees in which the national oil company would represent the Iraqi side. It is also worth noting that the role of the national oil company includes the coordination and supervision of the work of national oil companies (the ‘South Oil Company' and the 'North Oil Company'). The disputes engendered an odd case where international oil companies that signed contracts with the KRG were put on a blacklist banning them from operating in the rest of Iraq. The disputes are expected to escalate further upon the completion of a separate pipeline from the Taq Taq field to Faysh Khabur near the Turkish border, near the end of 2013. Indeed, this pipeline will allow the KRG to export Iraqi oil independently from the Iraqi government, in violation of the constitution which stipulates that the government is the sole authority responsible for exporting Iraq's oil. The productive capacity of the KRG is about 300 thousand barrels per day at present, and based on discoveries achieved so far, according to oil officials in the KRG, the productive capacity will rise to about 1 million barrels per day in 2015 and about 2 million barrels by 2019. * Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)
