Fiscal squeeze will slow Iraq oil sector expansion

Abstract

Subject The impact of a fiscal squeeze on oil sector investment. Significance Despite continuing turmoil in parts of the country, Iraq's oil exports are rising, averaging close to 3 million barrels a day (b/d) in March, the highest since 1990 when financial and trade sanctions were imposed after the occupation of Kuwait. April exports are on course to top 3 million b/d. Yet financial difficulties caused by the decline in global oil prices and the high cost of the war against the Islamic State group (ISG) are affecting the government's ambitious investment plans for the sector, prompting the oil ministry to request international oil companies (IOCs) in southern Iraq to scale back their expansion plans. Impacts Government plans to increase southern production from almost 3 million b/d to 8 million b/d by 2020 will need to be revised. Introduction of new heavy grade oil expands Iraq's oil marketing potential. Decline in oil revenues will lead to reduced government spending and a higher fiscal deficit in 2015.