Iraq's Ambitious Plan to Boost Oil Production

Iraq, the second-largest producer in OPEC, has set an ambitious target to raise its oil production capacity above 6 million barrels per day (bpd) by 2029. This goal is part of a broader strategic initiative to support production levels, increase exports, and drive sustainable growth in the energy sector. The plan involves significant investments in oil, gas, and petrochemical projects, as well as strategic partnerships with international companies.

The Iraqi government has outlined several key initiatives to achieve this target. Deputy Minister for Extraction Affairs Basim Khudair has stated that the government aims to support production levels and increase exports. This includes granting new contracts to foreign companies for the development of oil and gas fields. For instance, British oil major BP has finalized the technical terms with the Iraqi government for redeveloping the Kirkuk oil and gas fields. This partnership is part of Iraq's strategy to leverage international expertise and investment to boost its production capacity.

In addition to these partnerships, Iraq is planning to offer fresh oil and gas concession sites to international companies in 2025 as part of two new licensing rounds "6+ and 7." These rounds aim to add nearly 3.459 billion cubic feet of gas per day and boost the country’s recoverable oil deposits to 160 billion barrels from around 145 billion, as reported by the official Iraqi Al Sabaah newspaper.

However, the geopolitical landscape, including OPEC+ agreements and regional tensions, poses significant challenges to Iraq's ability to meet its production targets. Iraq has repeatedly pledged to compensate for the additional quantities of crude it has pumped, but it has struggled to adhere to its quotas. For instance, during the first half of 2024, Iraq overproduced by 1.2 million barrels per day (bpd), according to an assessment by secondary sources cited by OPEC. This overproduction has led to agreements to cut crude exports to 3.3 million bpd to compensate for exceeding its OPEC+ production quota, but Iraq continued to overproduce until a new agreement was put in place in July.

The OPEC+ agreements play a crucial role in determining Iraq's production levels. In August, following the visit of the OPEC secretary general to Iraq, Baghdad reiterated its commitment to reduce its oil output "in the coming months." However, the modest increase in Iraq’s quota under the new supply restraint accord by OPEC+—from around 4 million bpd to 4.1 million bpd at the end of 2025 and nearly 4.2 million bpd at the end of 2026—poses a hurdle to its ambitious plan to expand its oil output capacity. This modest increase contrasts with the significant increases granted to other OPEC+ members, such as the UAE and Saudi Arabia, which have been allocated increases of around 300,000 bpd and 900,000 bpd, respectively.

Regional tensions and internal conflicts also impact Iraq's oil production. The country faces tough choices and conflicts when it comes to its national oil policy. For example, Iraq has awarded several contracts to foreign companies to develop its oil and gas fields, which commits it to pay damages to those companies for the produced oil, which it may not be able to market due to output restraint. This situation highlights the delicate balance Iraq must maintain between meeting its production targets and adhering to OPEC+ agreements.

To mitigate potential disruptions, Iraq has several contingency plans in place. The Iraqi government has plans for major oil, gas, and petrochemical projects, as revealed by Prime Minister Mohammed Shia Al-Sudani during a meeting with senior executives of US Oilfield services company Baker Hughes. These projects aim to support production levels and increase exports. Additionally, the Iraq Development Platform, through the Iraq Energy 2025 conference, seeks to drive innovation, attract investment, and promote sustainable growth in Iraq's dynamic energy sector. The conference aims to tackle key challenges and identify opportunities across traditional oil and gas industries as well as emerging renewable energy solutions.

Furthermore, Iraq's Oil Ministry has reaffirmed its goal of reaching 7 million barrels per day (bpd) within five years. The ministry's strategic priorities include eliminating gas flaring and ending the import of petroleum products in the near future. These initiatives are part of a broader effort to boost crude production and ensure the country's energy security.

In summary, Iraq's ambitious plan to raise its oil production capacity above 6 million bpd by 2029 is a strategic initiative aimed at supporting production levels, increasing exports, and driving sustainable growth in the energy sector. While the geopolitical landscape and regional tensions pose significant challenges, Iraq has contingency plans in place, such as major oil, gas, and petrochemical projects, and strategic initiatives to drive innovation and attract investment, which aim to mitigate potential disruptions and support its ambitious production goals.