Iraq’s energy sector steadily expands
15 May 2023
MEED's latest coverage on Iraq's energy projects market includes:
> PIPELINE STOPPAGE: Turkiye yet to respond to Iraqi oil request
> CHEMICALS: Iraq continues technical studies for $8bn chemical project
> UPSTREAM DEVELOPERS: No place like Iraq for international oil firms
> OIL TRAINS: Key Iraq oil project units arriving in third quarter
> GAS: Iraq gas project on track for commissioning this year
> INVESTMENT: Total deal could lead to project boom in Iraq
> RUMAILA FIELD: BP and PetroChina prepare to award Iraq oil contract

Iraq's oil and gas projects market has steadily expanded over recent months, with the total value of the country's active oil, gas and chemical projects rising by nine per cent since the start of 2020.
As of 2 May 2023, Iraq’s active oil, gas and chemical projects were worth an estimated $143.9bn, up from $132.2bn on 7 January 2020, according to data collected by the regional project-tracking service MEED Projects.
Over the period, in nominal terms, the country’s energy project market expanded by $11.7bn, which is far larger than some of its regional competitors, but also lagging behind some key markets that are continuing to see a dramatic expansion in project activity.
In terms of energy project market expansion, Iraq has outperformed countries such as Algeria, Kuwait and Libya.
Countries that have performed far better than Iraq include Egypt, Qatar, Saudi Arabia and the UAE.
Over the period, energy project activity has surged in Saudi Arabia, which overtook Iraq to become the region’s largest market for hydrocarbon projects in mid-2022.
Since the start of January 2020, the total value of Saudi Arabia’s active oil, gas and chemical projects has increased by $61.3bn, rising from $112.7bn to $174.1bn.
Over the same period, the total value of Egypt’s active oil, gas and chemical projects sector has expanded by $46.6bn, according to MEED Projects, rising to $136.1bn.
Nations such as Saudi Arabia and Egypt have made ground on Iraq in terms of the size of their energy project markets, partly by taking advantage of Europe’s efforts to shift away from Russian energy imports.
They are also investing in hydrocarbon and chemical technologies that will likely see increased demand during the ongoing global energy transition, such as upstream gas production, the production of the precursors to plastics, and ammonia production.
Political uncertainty
While Iraq has seen its energy projects market steadily expand, it has missed out on the dramatic growth seen in Saudi Arabia and Egypt due to a range of factors.
A key factor that has hobbled Iraq’s expansion over recent years has been political instability and an inability to make critical policy decisions regarding the country’s economy.
In 2022, the caretaker government failed to pass a budget amid political wrangling. The interim parliament, which had limited access to funds, passed a $17bn emergency package called the Food Security and Development Bill, but was not mandated to make important decisions about major projects.
Multi-year budget
From a political perspective, there is reason to be more optimistic about Iraq’s ability to make future investment decisions due to the finalisation of a three-year budget law in March this year.
A draft budget of ID197.82tn ($152.17bn) was announced for 2023, with an agreed operational expenditure of ID150.27tn ($115.59bn), and an investment expenditure of ID47.55tn ($36.58bn).
The budget is drafted to allow it to be repeated in 2024 and 2025. It is the first time an Iraqi government has drafted a multi-year budget, having typically passed one-year budgets.
Ahead of the budget agreement, Iraq made a string of major project announcements. These include plans to revive the $8bn Nebras petrochemicals complex in Basra.
The multi-year budget should also allow for more strategic projects to pass over the coming months, allowing Iraq to adapt to changing market conditions, including the global energy transition and shifting dynamics in Europe and Asia.
Iraq has already signalled that it is looking to modernise its downstream oil sector, improving the complexity of existing refineries and building new facilities.
Gas projects
In terms of gas sector projects, progress will likely be made on existing projects to capture gas from oil fields that would otherwise be flared. More projects of this type could be announced shortly.
Iraq and its international partners are likely to prioritise these projects because they provide increased gas supplies and new revenue streams and have a positive environmental impact.
Iraq-Turkiye tensions
Although the political outlook is improved by the increased certainty regarding annual budgets, the country’s energy projects market could experience growing disruption over the coming months due to tensions between Iraq’s federal government, the Kurdish Regional Government (KRG) and the government of Turkiye.
At the end of March, in the wake of a ruling by the International Chamber of Commerce Court of Arbitration last month, the oil export pipeline that extends from the north of Iraq to the Turkish port of Ceyhan was shut down.
The pipeline is a key export route for Iraq. When operating normally, it transports 400,000 barrels a day (b/d) from Iraqi Kurdistan and 70,000 b/d from the rest of Iraq.
On 4 April in Baghdad, Iraqi Prime Minister Mohammed al-Sudani and the Prime Minister of the Iraqi Kurdistan Region, Masrour Barzani, signed a temporary agreement designed to restart oil exports from the north of the country.
Despite this, after more than a month, oil exports via the pipeline are yet to resume.
The lengthy stoppage and lack of clarity over when exports will recommence have cast a shadow across Iraq’s oil sector, forcing oil fields in the north of the country to seal wells and stop production and putting the future of planned upstream projects in doubt.
While there remains a cause for concern regarding political stability in Iraq, the fundamentals for the country’s oil and gas sector remain sound.
Iraq's state-owned oil companies and their international partners have shown in the past that they can negotiate difficult political and security situations, and the country will likely be able to continue to steadily grow its energy projects market over the months to follow.
MEED's June 2023 special report on Iraq includes:
> GOVERNMENT: Sudani makes fitful progress as Iraq's premier
> ECONOMY: Iraq hits the spend button
> POWER: Iraq power projects make headway
> UPSTREAM DEVELOPERS: No place like Iraq for international oil firms
> CHEMICALS: Iraq continues technical studies for $8bn chemical project
> SOLAR: Total continues 1GW Iraq solar talks
> TRANSPORT: Baghdad approves funds for metro and airport projects
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