Iraq heading for show down

"There were 11 fields, but the Oil Ministry last week decided to exclude the Siba gas field in Basra ... The reason is that this was considered a small field that the South Oil Company can develop itself," Ameedi told the news agency.  However, main interest is already low, leaving Baghdad in reality no other option than to keep all available offers listed. If more fields will be taken out, not based on commercial issues but due to the unwillingness of Iraqi oil players and politicians to hand over ownership to international parties,  no real interest is expected.

 

At the same time, news has emerged that regional governments in Iraq have indicated to be interested in a more powerful role. Shi'ite and Sunni regions already have indicated that they want to be involved in new bid rounds and the following deliberations on awards. The role of the Kurdish regional government (KRG) will be also of growing importance. The next days  a new Kurdish government will be elected, after that they also have voted for a president. Main interest at present however is still not on the political climate in Kurdistan, but on the continuing fight between the KRG and Baghdad regarding the oil and gas resources in the region. Most analysts expect that the current president Massud Barzani will return to office. Barzani's party, the Kurdistan Democratic Party (KDP), and the other main party, Iraq's President Jalal Talabani’s Patriotic Union of Kurdistan (PUK), will be the main winners. The two have even joined their lists in the current elections.  The outcome of the elections is clear, but the relationship with Baghdad is heating up.  The KRG has still decided to go its own way with the development of its own oil and gas reserves. Additional conflicts are looming about the Kurdish claims on 16 disputed areas, such as the oil-rich Kirkuk and parts of three other historically Kurdish-populated provinces — Diyala, Nineveh and Salaheddin.  Nothing has shown lately that the KRG and Baghdad are heading for a rapprochement in the next months. A new government in Kurdistan, combined with political struggles in Baghdad, will not lead to solving the conflict soon. As long as Baghdad refuses to approve KRG oil and gas deals with international operators, a major conflict looms on the horizon.

 

These political issues have been one of the main reasons for the lack of interest for the first bid round. Baghdad's resource nationalism and financial demands on potential bidders also has been behind the collapse the last month. Current developments regarding the second bid round now again are showing the same inclination. Baghdad does not seem to understand that to improve its oil and gas production, it needs to attract investors and operators, not presenting deals that nobody wants to comply too. Additional issues regarding the Oil Law, which have not yet been cleared, also are debet to the current instable situation.

 

The world has been keeping a wary eye on Iraq, as it was seen to be the only viable option to increase overall oil production soon. The lack of developments in the country are however showing that this is a dream, not reality. Iraq's potential to produce between 4 and 6 million bpd of crude oil soon will not be reached at all. The debilitating situation of the country's oil sector also shows that production could be even going down more before an increase is able to be put in place.