Iraqi Oil: Black Gold or Black Hole?

Investors and global oil companies such as Shell Petroleum, Eni, China National Petroleum, and Exxon Mobile betting on Iraq are certain to be disappointed.

Ever since the fall of Baghdad in April 2003, we have heard about the unlimited potential for the Iraqi oil. Often news reports mention that Iraq has the third largest oil reserves in the world, and that Iraq’s oil ministry has a goal of producing 6 million barrels/day of oil over the medium term.

However, six years after the fall of Baghdad, the country is nowhere close to producing 6 million barrels a day. As a matter of fact, the country is still not producing at the same level it did before the war (2.2m bpd vs 2.5m bpd before the war). It is worth noting that the pre-war level was achieved despite years of war and crippling economic sanctions. Yet despite current access to capital and technology, the country could not yield better results than oil production under the Saddam regime in the midst of war and sanctions.

The Oil Drum