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Oil & Gas

The crude oil and gas sector is the lifeline of Iraq’s economy. The sector generates more than half of Iraq’s economic output and almost 90% of its public revenue. With 115 bn barrels, Iraq currently has the third largest reserve asset in the world. The extraction rate is approximately 2.4 million b/d and with foreign aid in years to come the rate is anticipated to increase considerably.

As of the end of 2009, more than 6 years after the US invasion, the outcome of the battle for a new direction in Iraq’s most important economic sector is not determined. The US vision of a complete opening of the crude oil and gas sector to foreign interests has so far been incapable of implementation. A new crude oil law was proposed as a Bill and has been discussed since 2005, but has continuously failed due to resistance from the Parliament and government, as well as by a large percentage of the Iraqi population. The opening of the sector contemplated by the Bill is seen as a sellout of Iraq’s national interests, reversing the nationalization of carbon hydride resources that was implemented in the 1960s and 1970s. As in all other domains in Iraq, the question of national sovereignty, and accordingly the remaining strength of foreign influence, lies at the heart of the argument.

The first two international call for bids concerning licenses for some of Iraq's largest oil fields in an example of the power struggle for the control of Iraq's crude oil and gas reserves. In June and December 2009, after a long preselection procedure, more than 30 international oil companies (IOCs) participated in two auctions for the so-called "Technical Service Agreements" (TSA). TSAs are not very popular with crude oil companies because they hardly offer any "upside", a term often used in the industry. "Upside" refers to a complete shareholding of profits by foreign companies in case of increasing oil prices, compared to limited fixed charges implemented by TSAs.

In the two call for bids, the Iraqi Ministry of Oil has agreed with nine bidders and consortiums of bidders, respectively, for ten oil and gas fields. The advancement is now supposed to increase from 2.5 million b/d to more than 11 million b/d in 2016.

The problem of the insufficient coverage of crude oil advancements is still not fully solved. Even six years after the “liberation”, counting devices at the export terminals are not entirely functional, which results in inconclusive production and export numbers. Who is profiting from this situation, which has existed since 2003, is not clear, but it is possible that certain “informal” oil quantities are exported outside official channels.
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