By Gavin Jones, Director of Iraq Business News, and Partner at consultancy firm Upper Quartile. This article was originally published on the Emerging Economics blog. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.
It is very difficult with a market like Iraq to separate current issues, past progress and likely consequences. Since mid-2009 there has been significant achievement and progress, a sustained period of calm which now, sadly, is turning into what will probably be a very violent period as the actions and indecisions running up to the last election start to be resolved.
Let us take a quick look back at what has been achieved by the Iraqi Government:
- Two licence rounds that were very much more transparent than most in Western countries;
- Production has increased from about 2 million barrels of oil a day in 2009 to about 3 million today and is increasing rapidly;
- 14 IOC’s (International Oil Companies) and hundreds of service companies operating in Iraq;
- $43 billion in foreign investment during 2010 with numbers showing about twice that expected in 2011.
- The Central Bank of Iraq has a surplus of $50 billion
The contracts being awarded are massive, but it is not clear to me that many companies are making much in the way of profits in the country because the operating costs are so high. If companies cannot generate earnings commensurate with the risk, they will leave – especially with the price of oil rising quickly.