The Soleimani Effect: A Game-Changer for Iraqi Crude Dynamics?
With the market having shrugged off the latest escalation between the United States and Iran, some of the aftershocks of recent events have heightened the risk of future US-Iran rivalry playing out in Iraq – OPEC’s second largest producer and a key source of oil supply growth out to 2030.
Next month’s decision by Washington as to whether or not to renew US sanctions waivers allowing Iraq to import Iranian gas volumes will provide clues as to whether recent events prove a geopolitical game-changer (or not) to Iraq’s oil (and energy) sector.
As this comment explains, Iraq’s post 2009 oil production growth took place against the backdrop of major challenges (a difficult investment environment, fiscal crises, protests, and a volatile security and geopolitical environment).
In this light, a sober assessment of Iraq’s oil outlook needs to consider how any structural shift to Iraq’s geopolitical position interacts with pre-existing challenges to the next chapter of production growth: deflationary forces in the oil market; the growing cost and complexity of upstream operations; the growing need for water to maintain and increase oil output; and the need to integrate upstream growth with midstream and downstream development.