Northern Iraq’s Oil

Dr. Angelos Kaskanis
Dr. Angelos Kaskanis

Project Manager - Tactics Institute

Iraq’s oil ministry has taken all necessary steps to implement a federal court ruling granting it authority to manage oil and gas fields in northern Iraq, in collaboration with regional Kurdish authorities.

Iraq produced 4.3 million barrels of oil per day in 2020, making it the world’s sixth-largest producer. It has the world’s third-largest proven conventional petroleum reserves at 147 billion barrels, trailing only Saudi Arabia and Iran, which have 297 billion and 155 billion barrels, respectively.

By the end of 2020, Iraq’s proven natural gas reserves were estimated to be around 125.6 trillion cubic feet. The management of oil and gas continues to be a source of contention between the Kurdistan Regional Government (KRG) and the Iraqi government.

In 2007, the KRG passed its own hydrocarbons law. This established that the KRG would administer oil and gas operations for the Kurdistan Region of Iraq. The KRG has since signed contracts with several international oil companies for oil production sharing, development, and exploration (IOC). The KRG region’s production and exports total 500-550 thousand bpd and 400-450 thousand bpd, respectively.

International Alliances

According to a Guardian analysis, former Iraqi President Saddam Hussein’s WMDs was not really the issue – and neither was Saddam himself. The main cause of the 2003 Iraq War, was “Middle East tension”, in particular, the threat posed by Iraq. In other words, oil. Saddam Hussein was considered a destabilising influence to the flow of oil to international markets from the Middle East. Saddam Hussein has also demonstrated a willingness to threaten to use the oil weapon and to use his own export programme to manipulate oil markets.

The situation today is very different. Major companies including Gazprom, US ExxonMobil and French TotalEnergies have singed oil exploration contracts with the KRG.

Iraq could be on the verge of a dramatic transformation, breaking free from the political and technical constraints that have kept it producing less than 4% of the world’s oil despite having the world’s third-largest conventional oil reserves.

Oil revenues are critical for the Iraqi government, which is mired in a financial crisis and in desperate need of funds to rebuild infrastructure after decades of devastation from war.

Iraq, with a population of 41 million people, is experiencing a major energy crisis and frequent power outages. Despite vast oil and gas reserves, Iraq is still reliant on imports to meet its energy needs. Iran currently supplies one-third of Iraq’s gas and electricity needs, but supplies are frequently cut or reduced, exacerbating daily load shedding.

Iraq, as a member of OPEC, must understand that it is in a historic momentum in order to seek funds and pursue a multidimensional policy that will lead, on the one hand, to energy self-sufficiency and also to a strategic upgrade.

The importance of Mosul

Mosul, located in the fertile Mesopotamian basin, is an old city with historic stone houses that reflect its past. The city includes the ruins of Nineveh, the ancient Assyrian capital.

Mosul, like other historic cities, had a cosmopolitan structure that housed Sunni and Shiite Muslims, Nestorians, Yazidis, Assyrians, Armenians and Jews. The city’s population is now made up of Arabs, Kurds and Turks.

Apart from the cultural value of the region, there is also a huge geostrategic importance, as Mosul is regarded the capital of the north. In the past, northern Iraq’s crude oil production and exports have exacerbated ongoing disputes between Baghdad’s central government and the KRG.

Prior to 2014, the central Iraqi government and its Ministry of Oil controlled and administered the majority of crude oil production in the north, primarily at the Kirkuk (Avana and Baba Domes) and Bai Hassan fields.

Production, however, was cut off from export markets after the Iraq–Turkey pipeline was severely damaged by militants and rendered inoperable in March 2014.

After being attacked by Islamic State (IS) militants, the Baiji refinery (Iraq’s largest at the time) also closed in June 2014.

More specifically, developing and monetizing northern Iraq’s underground wealth is the cornerstone of a successful development strategy from an Iraqi standpoint.

Iraq’s development needs are enormous after more than 30 years of internal conflict, international war, sanctions and dictatorship. Regaining Iraq’s position as one of the region’s more advanced economies and societies will necessitate massive investments in infrastructure, health and education.

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