The energy sector dominates the economies of the Middle East with an iron fist. In addition to the high-profile cases of Saudi Arabia and the United Arab Emirates, there is Iraq, a country whose economy is entirely dependent on 'black gold'. However, while its Gulf neighbours are trying to alleviate the burden and diversify their sources of income, the Iraqi government is doubling its bet and deciding to increase its crude oil production for the coming years, thus shielding the oil sector's monopoly over its economy.
This was announced last week by the head of the oil ministry, Ishan Abdul Jabbar. "The oil ministry plans to increase oil production to eight million barrels per day by the end of 2027," he told Iraq's INA news agency. Iraq is OPEC's second largest producer behind Saudi Arabia with about 4.5 million barrels per day. If realised, the country would double its current capacity, a complex challenge for a country in the midst of a severe economic crisis.
Oil ministry spokesman Assem Jihad said the project is still under study. "The increases have been calculated according to the variables and the evolution of the oil market, and it is not possible to predict what the market will be like," he told INA. Jihad stressed that "oil-producing countries, due to the challenges facing the oil market, have reconsidered their plans and calculations," referring to the strategies outlined by their OPEC partners in the wake of the COVID-19 crisis. Unlike Baghdad, they have opened up and are seeking to exploit new revenue streams to reduce their dependence on oil. Riyadh, with its Vision 2030 plan, is the most ambitious in this area.
The announcement comes on the heels of the agreement signed in mid-July by the oil ministers of OPEC+ members. The organisation announced a gradual increase in joint production over the next five months of an additional 400,000 barrels per day every 30 days, all with the aim of stabilising oil prices and avoiding upward pressure months after the collapse. Members of the group will meet again in September to review production quotas, a move that will benefit Iraq, among others.
To implement its production plans, the Iraqi government has issued numerous operating licences to a number of foreign companies to drill new wells and recover existing ones in the Kirkuk, Baghdad, Basra, Maysan and Nasiriyah areas. The announcement was made by the head of the Iraqi Drilling Company (IDC), Basem Abdul Karim, in a statement published in the daily Al Sabah. Among the agreements reached by the CPI, a department subordinate to the Ministry of Oil, are those with Italy's Eni and Britain's BP.
Iraq has also reached a preliminary agreement with the Chinese state-owned company CNOOC (China National Offshore Oil Corporation) to recover 150 wells in the Bazarkan field, located near the Iranian border, worth 160 million dollars. According to the Iraqi agency INA, this latest project will involve the US company Weatherford. With these actions, the country will restart the oil extraction and production projects that were left in the dry dock by the pandemic.
Prior to COVID-19, the total value of exports amounted to $82.309 billion, $80.027 billion of which came from oil. However, Iraq, with one of the world's largest oil reserves, was deeply affected by the fall in oil prices, as 90% of the state's funds come from this sector.
With this measure, the country is sealing its bet on 'black gold' in the face of its inability to coordinate a cross-cutting response. The political weakness of the current government and the endemic corruption plaguing Iraq have led its leaders to opt for this measure as an escape route to mitigate the serious economic situation.