Iraqi oil production is currently approximately 3 million barrels per day, according to Iraq Ministry of Oil figures. Natural gas production is approximately 1.9 billion cubic feet (BCF) per day, but approximately 70 percent of this natural gas is currently flared, according to Sarah Haggas, Ph.D., Regional Manager, Middle East, IHS Energy.
So far, it appears that there has not been an impact on production as the majority of the producing fields are concentrated in the southern part of Iraq, away from the violence. IHS Energy has not heard any reports of production being shut-in so far.
About 80 percent of this oil production is exported. The majority of exports are transported via tanker through the southern Fao terminal. Usually, there is also a smaller component exported north to Turkey via the Kirkuk-Ceyhan pipeline, however, the pipeline has been out of operation for several months due to repeated attacks. The pipeline was due to be repaired shortly, but this has probably been affected by the current situation. Another major pipeline ran to Syria, but this has fallen into disrepair and is no longer used.
The key producing fields are predominantly located in the southern Iraq, particularly in Basra Province. The field with the highest production, Rumaila, is located here. The main producing field in the north is the Kirkuk field; however, lately production has been reduced due to the pipeline situation mentioned earlier.
Most of the large fields in the south are being developed in collaboration with international oil companies (IOCs) under technical service contracts. Under this system, ownership of the field is retained by the Iraqi state, but the field is developed by an international operator who is remunerated for increasing and maintaining production at the field. Examples of IOCs working under service contracts in southern Iraq include BP (Rumaila field), Shell (Majnoon field) ExxonMobil (West Qurna (southern part)), Lukoil (West Qurna (northern part)), Eni (Zubair), Gazprom (Badrah field) and Japex (Gharraf field).
Many of the IOCs have stated that they have evacuated their non-Iraqi personnel as a precaution, even though operations are still underway at the fields. Although work has been progressing on development of the fields, limited progress has been made on development of national infrastructure. Pipelines are planned or under construction, and there are plans to build new refineries, but we expect all of this will be delayed by the ongoing unrest in the country.
The Kurdistan Region, which is in Northern Iraq, has awarded its own oil and gas contracts to international companies some of whom, including ExxonMobil, are also operating in Southern Iraq. These contracts are production sharing contracts, so the participating company is also entitled to a share of the field’s production.
There is an ongoing dispute between the federal Iraqi government and the Kurdistan Regional Government over the legality of these contracts and the right of the region to export oil from its fields. Despite the dispute, the region is exporting oil via Turkey by trucks and a newly constructed pipeline. Operations are still underway in the Kurdistan Region and we have not had any reports of it being affected by the violence.