Iraq has vast reserves of oil and natural gas, and is one of the most promising, still largely undeveloped sources of hydrocarbon resources in the world. Iraq is actively seeking international investment and expertise and has begun the process of substantial reengagement with investors from around the world. Iraq was the world’s 12th largest oil producer in 2010, and has the world’s third largest proven conventional petroleum reserves after Saudi Arabia and Iran. 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 60% of GDP in 2011. According to the Government of Iraq (GOI), Iraq has proven oil reserves of 143 billion barrels and 126.7 trillion cubic feet of natural gas. Current oil production is about 3 million bpd and goals are to produce about 6 million bpd in 2014 and 10-12 million bpd by 2016-2017. According to the GOI, Iraq has proven oil reserves of 143 billion barrels. 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 barrels) as well as 22 known giant fields (over 1 billion barrels). 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. In 2011, Iraq’s crude oil production averaged 2.7 million barrels per day (bpd), just below its estimated pre-war production capacity level of 2.8 million bpd in 2003. The GOI’s goals are to produce about 6 million bpd in 2014 and 10-12 million bpd by 2016-2017. About two-thirds of current production comes from the southern fields, with the remainder from the north-central fields near Kirkuk. At present, the majority of Iraqi oil production comes from just three giant fields which are North and South Rumaila in southern Iraq, and Kirkuk. The Kurdistan Regional Government (KRG), the official ruling body of a federated region in northern Iraq that is predominantly Kurdish, passed its own hydrocarbons law in 2007. Despite the lack of a national Iraqi law governing investment in hydrocarbons, the KRG has signed oil production sharing, development and exploration contracts with several foreign firms, and began exporting its own oil briefly. As a result of several contract awards, Iraq boosted production by 200,000 bpd by the end of 2010, and increased production capacity by an additional 500,000 bpd by the end of 2011. When these fields are fully developed, they will increase total Iraqi production capacity to almost 12 million bpd, or 9.6 million bpd above current production levels. The contracts call for Iraq to reach this production target by 2017. 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 are underway to supply additional power with more projects slated for the future. Oil sector expansion is estimated to total $300-$500 billion through 2020. With unprecedented expansion planned for Iraq’s oil sector over the next eight years, while not quantified, this represents tremendous potential. Iraq also has vast amounts of unproven reserves throughout the country with estimates ranging between 45 and 215 Bbl. To date, only about 10% of the country has been surveyed for gas and oil deposits, creating a considerable opportunity for investors.
According to the Government of Iraq, Iraq’s proven natural gas reserves are 126.7 trillion cubic feet (Tcf), the tenth largest in the world. An estimated 70 percent of these lie in Basrah governorate (province) in the south of Iraq. Probable Iraqi reserves have been estimated at 275-300 Tcf, and work is currently underway by several 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 Qurna, 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 al-Mansuriyah.
Iraqi natural gas production rose from to 81 billion cubic feet (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. Approximately 86 percent of gas production in 2010 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.
Iraq’s oil and gas is also easily extractable. The cost of bringing oil and gas production on line in Iraq is among the lowest in the world. The country’s oil lies in enormous fields that can be tapped by relatively shallow wells. Iraqi oil rises rapidly to the surface because of high pressure on the oil reservoirs from water and associated natural gas deposits. More than a third of Iraq’s reserves lie just 600 meters below the earth’s surface, and some of Iraq’s fields are among the world’s largest. A barrel of Iraqi oil can be produced for less than $1.50 USD. This is similar to production costs in Saudi Arabia and lower than virtually any other country.