September 26, 2023

Iraq’s Oil Industry and Current Economic Outlook



Iraq’s Oil History & Outlook, Part Two

Iraq is destined to become a regional if not global superpower based on the richness of its oil wealth. After all, this young democracy sits atop the world’s second-biggest reserves of high-quality petroleum.

Iraq’s future seems bright indeed. Regardless of the current political squabbling, the oil-fueled Iraqi economy continues to grow rapidly. It’s perennially rated as one of the world’s top ten fastest-growing economies, and there’s plenty of room for additional expansion.

Still, in order to see the clearest view of what the Iraqi economy may look like in five or ten years, it’s helpful to take a look at the history of Iraq’s oil industry as well as new oilfield technologies that are increasing Iraqi production and revenues.


In Part One, we looked at the history of Iraq’s oil-based economy as well as the political and economical developments leading up to the rise of Saddam Hussein and his control of the nation’s economy.

Now let’s take a look at Iraq’s oil industry and current economic outlook, particularly what they mean for the value of the Iraqi Dinar

, beginning with the turning point of the coalition invasion in 2003 which ousted Saddam.

The Beginning of the End for Saddam

The U.S.-led invasion and occupation of Iraq quickly ended Saddam Hussein’s ruthless 30-year regime, and it was also the beginning of a new era for Iraq’s long-neglected oil industry.

With Saddam and his cronies gone, the nation soon entered a period of unprecedented economic growth fueled by its booming oil industry.

Once the dust settled after the 2003 invasion, American, European and Middle Eastern oil companies quickly arrived, ready for business. There was much work to be done.

Oil industry infrastructure in the Kurdish region of northern Iraq was relatively unscathed by actual fighting during war.

Still, oilfield equipment and facilities there suffered from years of neglect due to the shortage of replacement parts and new technologies made unavailable by the years of UN-imposed trade embargo and economic sanctions.

In southern and central Iraq, the scene was different: Between the Gulf War of 1991 and the fighting during 2003, approximately 60% of the oil production and refinery facilities in those regions were damaged.

Apart from the impact of economic sanctions and war, Saddam himself stunted the country’s oil industry even further by mandating reservoir-management policies which resulted in lower production for several years after his departure.

Wells were over-pumped, which in some cases permanently reduced their future outflows. And, in an attempt to boost yields lagging because of equipment maintenance issues, the Iraqi engineers reinjected excessive amounts of low-end petroleum fractions back into the ground.

Reinjection is a standard industry technique for increasing a well’s output. However, the Iraqi petroleum engineers reinjected overly-viscous oil constituents back into some wells, which slowed output for several years after Saddam’s departure.

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