Expert: Corruption Prevents Iraq From Benefiting From Its Vast Oil Reserves And Resources
Last update August 17, 2022
The Independent / A senior international economic expert monitored, on Wednesday, a number of reasons, including “corruption” that prevent Iraq from benefiting from huge resources and huge oil reserves, noting that
these capabilities “if exploited” make it go a long way in mitigating international economic damage.
Iraq has an estimated 145 billion barrels of proven crude oil reserves, and the country plans to increase crude oil production to 8 million barrels per day, up from about 4 million barrels at present.
Increased Iraqi production could add a significant amount of oil to a market hungry for this product,
but a report written by Simon Watkins, a former major forex trader and economic journalist and author, for Oil Price said
there were a number of factors, including corruption issues, and weak civil society. Insecurity and lack of resources prevented Iraq from implementing its oil exploration and production strategies.
And the report quoted Hamid Younis, the first vice president of the Iraqi National Oil Company, as saying last week that the country plans to increase crude oil production to 8 million barrels per day.
He also quoted the Director-General of the Iraqi Oil Exploration Company, Ali Jassim, as saying that the next phase will witness "notable activity" in the exploration sector, including operations in the Western Desert and Nineveh Governorate.
Given the current delicate balance between supply and demand in the global oil pricing matrix,
a large new supply would go some way to mitigating the economic damage to many countries by enduring higher oil and gas prices, if the ambitions are “realistic,” according to Watkins. .
Iraq owns about 18 percent of the total reserves of the Middle East, and about 9 percent of the world's reserves, and is the fifth largest in the world.
However, according to the International Energy Agency (IEA) in its 2012 report on the country, the extent of Iraq's viable oil resources For eventual extraction it is subject to a great degree of "uncertainty".
The writer says that the reserves may be much larger, as the 2012 International Energy Agency analysis put the level of ultimately recoverable crude oil liquids and natural gas resources in Iraq at about 232 billion barrels,
but as of the end of 2011, only 35 billion barrels had been produced. Of that number, compared to 23 percent for the Middle East as a whole, according to the International Energy Agency.
However, it is one thing to have huge levels of reserves and recoverable resources, but to dig and export them is quite another.
During the period from the release of the IEA report in 2012 until now, crude oil production in Iraq has risen from just over 3 million barrels per day to just over 4 million barrels per day. y
In absolute terms, Watkins says, this increase ranks as a very poor return for Iraq's crude oil resources, especially when considering how easy it is to extract its oil.
Crude oil in the country has the lowest extraction cost in the world of 1-2 dollars per barrel,
equal to the extraction costs of crude oil for Saudi Arabia and Iran.
Also, the current production rates are much lower than the Iraqi national plans and international expectations, which indicated that Iraq would reach 9 million barrels per day by 2020, or at least 6 million barrels per day.
In 2012, the International Energy Agency expected that Iraq's oil production would rise to 9 million barrels per day in 2020 and then rise to 10.5 million barrels per day in 2035.
Why is production delayed?
The writer says that the basis for Iraq to achieve these massive increases in crude oil production is there and quite solid,
but the rampant corruption that has plagued the Iraqi oil sector, especially since the fall of Saddam Hussein in 2003, and the failure to build the Common Sea Water Supply Project (CSSP) The reason was that production rates were so late.
The project involves taking sea water from the Gulf and then treating it before transporting it through pipelines to the oil fields to increase pressure and increase oil consumption.
Initially, it was supposed to cost about $10 billion so that it could provide about 6 million barrels per day of water to five fields. At least oil in the southern Basra region and one in the Maysan region.
The writer says that the “culture of corruption in Iraq” is responsible, as Iraq usually appears among the 10 worst countries out of 180 countries for the size and scope of corruption.
The author quotes International Transparency Reports stating that
“large-scale embezzlement, procurement fraud, money laundering, oil smuggling, and widespread bribery have led the country to the bottom of international corruption ratings, fueled political violence and impeded effective state building and service delivery.”
This may be the main reason why the CSSP project is not going forward, says Watkins, but
if Iraq can rid the project as much as possible of the rotten elements, it can begin to achieve the massive increases in crude production it envisions.
Source / Al-Hurra American website