Although the International Energy Agency reports that Iraq has produced record amounts of crude from its southern fields in recent months, a number of security, economic, and political obstacles stand in the way of maintaining and growing Iraqi Sustainable Crude Oil Production Capacity, currently reported as 4.1 million barrels per day. Some analysts have recently revised forecasts downward in light of these concerns.
Iraq oil and ISIS security issue
While ISIS has not successfully attacked any major southern Iraqi crude oil export infrastructure, recent Russian aggression in Syria has introduced a new and possibly destabilizing military and political force into the region. Some Iraqi politicians are calling for Russian airstrikes in Iraq. Increased bombing, even if limited to ISIS dominated territory, could cause some international oil companies with current or prospective Iraqi investments to reconsider operations.
Iraq oil and the exodus of skilled Iraqi workers
The dramatic refugee flow from the Middle East to the European Union includes many skilled Iraqi workers. While many of these refugees may be fleeing ISIS persecution in Northern and Western Iraq, some oil field workers and technicians critical to maintaining southern Iraqi oil exports may become part of the emigration and thereby limit available personnel.
Iraq oil and the common seawater supply facility
Iraq must inject seawater into its southern oil fields to maintain and grow hydrocarbon production. Projected to cost at least $10 billion, the Common Seawater Supply Facility is being designed to provide 12.5 million barrels per day of treated sea water to these critical fields.According to the International Monetary Fund, the project has been delayed several times.
Spending cuts by Iraqi Oil Ministry
The global decline in the price of oil in the last year combined with increased domestic and military spending caused the Iraqi oil ministry to issue a warning that it will significantly reduce reimbursements to independent energy companies spending in 2016. This may inhibit maintenance and expansion of Iraqi production goals.
Your Turn
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Tom Morgan