Iraq Oil Output

Its no surprise that Iraq’s oil production slowed after the American invasion in 2003. And its not shocking that it took a while for oil production to regain strength. But as of February of this year Iraq is producing 50% more than it was four years ago. Iraq is now pumping out 3.6 Million barrels a day, up from 2.4 Million in February in 2010. One would expect Iraq’s economy to be booming with such an increase in oil production however it isn’t so easy. The past decade of sanctions, neglect, and war have lead to the oil fields being neglected.

Companies like BP, Royal Dutch Shell, and ExxonMobile have been investing in the oil fields to revive them after a decade. The investments have lead to a huge increase in production, there is however, still one problem. The infrastructure in the company still hasn’t been updated. To get the increased quantity from the wells to the tanker, the infrastructure would require an overhaul. So it seems that its time to updated it but it is unclear whose going to pay. The government is the likely source of funding for the overhaul, as it would likely lead to bolstering the overall economy. The seem to be slow when it comes to providing though, so it is possible that major companies could look to kick in funds, and get the oil to the tankers at a lower cost. Personally I think this is a better option.

The government is still not the most stable since the downfall of Saddam Hussein’s regime. There are bureaucracy issues between parties that lead to the slowing of getting funding provided. There is also a major problem with corruption and bribery. Problems like these don’t help expedite the process. With a young and unstable government it isn’t likely the infrastructure will see an update anytime soon.

The companies who own major oilfields in the area could offer to kick in funds. This would help get more oil from the fields to the tankers, leading to higher profits for the company. A cost benefit analysis would show whether providing funds for infrastructure is profitable. Currently, things as simple as high winds slow production. Iraq doesn’t have the storage space for excess fuel and the wells are shutdown all together. The pipes are routinely shutdown completely for maintenance, something that a modern system wouldn’t face. Providing money to improve the pipe system and increase storage facilities would create a constant flow of oil from the wells to the tankers. Something that would benefit the major oil companies in the long run.

2 thoughts on “Iraq Oil Output

  1. josimon

    The government will not fund for the updated systems. Although an overhaul is pretty necessary (from what it looks like) there still does not seem to be that much support on this issue from the country itself. Companies like BP would enjoy an overhaul like this, but it also seems that there may not be much great leadership out there to get the ball rolling on this type of project.

  2. ajsanna

    One interesting issue this brings up is who is Iraq selling the oil to? Because of its importance, oil exports can have a big impact on geopolitical concerns. If Iraq is selling primarily to the EU, I would feel comfortable knowing that there is a symbiotic relationship between regions I hope would be US allied. If they are selling to China and southeast Asia, this could be a defensive issue for us in the future.

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