Iraq’s Petroleum: Challenges of Managing the Plenty

The paper argues that with the apparent absence of sound national planning and development policy, even the lowest production target would deepen the dependency on oil, further the structural imbalances of the economy and entrench the challenges of the rentier economy to the detriments of sustainable development. Absorptive capacity limitation, Dutch disease and resource curse are likely to persist and thus confront and undermine the national efforts on the socio-economic development.

On the other hand Iraq needs significant capital for both investment and consumption purposes, and oil export revenues, currently and for long time to come, are the only source for securing the needed capital. But this implies serious vulnerability of the economy to external shocks.

Part one of the paper (Slides 4: 10) addresses the main parameters of this Big-Push Strategy by outlining the outcomes of the conducted bid rounds in terms of their contracted oil production plateau targets and related time-horizons focusing on both the brown and green oilfields. During the first two bid rounds and one direct deal the Ministry signed 12 LTSCs covering 14 oilfields. The combined proven reserves of these fields amounts to 67 billion barrels representing 58.5% of the country’s proven reserves at that time. When these oilfields are developed as contracted, their total plateau target would increase from 1.7 mbd to 12.3 mbd by 2017. Moreover, three gas fields were contracted in bid round three and four exploration blocks were contracted in bid round four. Currently, there are planes for fifth bid round covering another exploration blocks; the Nassiriya Integrated Project-NIP covering the development of a field with 4.4 billion barrel of proven reserves and construction of a refinery with 300 kbd capacity; the Kirkuk oil fields, and many others oilfields. If production from all these added up total production could reach 13 mbd.

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