The issues Iraq faces concerning its natural resource use have been largely effected over the past three decades by war and civil unrest. In late June of 2010 the U.S. allocated $20 Billion to Iraq Oil and Gas sector to begin modernization of its oil infrastructure. Long-term reconstruction costs in Iraq are estimated to amount to $100 billion or more, according to reports by various U.S. government agencies, multilateral institutions and other international organization.
The Hydrocarbons Law, which would govern oil contracting and regulation and provide a legal framework for investment, has been under review in the Council of Ministers since October 26, 2008. Christopher Hitchins, in an article for Slate in March of 2007, offered a particularly sanguine view of the democratic potential of the passage of such legislation labeling it as "Federalized control over oil and gas with a distribution of revenue in proportion to the population of each province." Find that article here: www.slate.com/id/2161629/. Hitchins also cites a less optimistic view from Christian Parenti published a week later in the Nation: www.thenation.com/article/who-will-get-oil.
The current status of the Hydrocarbons Law is that once it is approved by the Council of Ministers, it will be sent to Parliament to be approved by the one regional (Kurdistan Regional Government, KRG) and 18 various governorate rerepresentatives there. The major conflict with the law, and what the EIA on its website labels the main "challenge to the development of the oil sector," is that resources are not evenly divided along sectarian-demographic lines. In other words, most of the hydrocarbon resources are concentrated in the Shiite south and the Kurdish north. There are few resources controlled by the Sunni minority.
The Iraq Oil Forum website in a series of posts tagged "hydrocarbon law" have a useful assessment of the current ongoing challenges facing its passage and highlight a potential main area of conflict between the KRG and the federal government: www.iraqoilforum.com/?tag=hydrocarbon-law.
This initial context into which Iraq's natural resource use and distribution falls is further determined by the EIA's following bullet point summary:
- Despite enormous amounts of oil reserves, Iraq's oil sector is constrained by the lack of investment resulting from years of sanctions and wars.
- Iraq may be one of the few places left where vast oil reserves have barely been exploited.
- Iraq's natural gas sector is believed to contain significant untapped resources which the Government of Iraq would like to develop for domestic consumption and export.
- Rehabilitation of the electricity sector is a major component of the Iraq reconstruction efforts.
Proven Petrol Reserves: 115 billion bbl (barrels), according to Oil and Gas Journal
> World's fourth largest
- However, such estimates are based on old data and there's strong potential that there could be an additional 45 to 100 billion bbl in the unexplored west and south
Production:
> 2009 - average of 2.4 million bbl/d (barrels per day) (same as '08 levels, less than pre- war 2.8M in '03)
- 2/3 of production is from fields in the south and roughly 1/3 from north near Kirkuk
>Ministry of Oil has central control over oil and gas production and development in all but the Kurdish territory through its three operating entities:
- the North Oil Company, the South Oil Company and the Missan Oil Company
Kurdistan Regional Government:
> Passed its own hydrocarbon law in 2007
> Signed oil production sharing, development and exploration contracts with several foreign firms
> Iraq Oil Ministry (IOM) is adamant that oil production in KRG must be shipped via the State Oil Marketing Organization (SOMO), Iraq's national company responsible for marketing its oil.
Development Plans:
> IOM has signed 12 long-term contracts between November of 2008 and May of 2010 to develop 14 fields.
- these contracts amount to proven reserves of over 60 billion bbls
~ Iraq is hoping these contracts will boost its production capacity to
12 million bbl/d by 2017
Infrastructure Constraints:
> Many challenges, for example:
- lack of outlet for increases in crude production
- Iraqi refining and export infrastructure are current 'bottlenecks'
- exports in north restricted by sabotage
- planned production increases require:
~ more natural gas and water injection to maintain reservoir pressure
* yet with water being scarce, plans to pump seawater via pipelines are being entertained
=ExxonMobil has coordinated initial studies for this
- Electricity and power generation
~ significant upgrades to the electricity sector are necessary
Refining capacity:
> (estimates vary) from 637,500 bbl/d (Oil and Gas Journal)
to 790,000 bbl/d (Special Inspector General for Iraq Reconstruction)
> Iraq refineries have an antiquated infrastructure
- Oil and gas sector is unable to meet domestic demand of 600,000 bbl/d
~ Iraq thus imports 30% of its gas and 17% of liquified petroleum gas
> 10 year strategic plan (s008-2017) to increase refining capacity to 1.5M bbl/d
- Iraq is seeking $20Bn in investment for this and plans for four new refineries
Exports:
> 2009: 1.8M bbl/d of crude oil
- 1.5M bbl/d from Persian Gulf ports
- 300,000 bbl/d from Iraq-Turkey pipeline in North
- majority of exports go to refineries in Asia (47%) and the rest to Europe (22%), the Western hemisphere (30%) and Africa (2%)
> Total effective export capacity: 2.5M bbl/d
- far lower than installed capacity because of disruptions, lack of maintenance and closed facilities.
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