Iraq deputy oil minister highlights drive to expand oil and gas production nationwide

BAGHDAD – Iraq’s Ministry of Oil is advancing its strategy to expand oil and gas production nationwide, aiming to transform most provinces into oil-producing regions to drive economic growth and create jobs, Deputy Oil Minister for Extraction Affairs Basim Mohammed Khudair announced.

The ministry has awarded 14 contracts to seven international companies, primarily Chinese firms, covering 12 provinces. These agreements are part of a revised economic model based on profit-sharing, ensuring Iraq retains a significant share of the profits while working toward energy self-sufficiency by 2030.

Excerpts from Khudair’s interview with Al Iraqiya:

The ministry’s plan aligns with the government’s vision to invest in various fields and increase production capacities for oil and gas. Regarding gas, the aim is to supply the necessary quantities for electricity and industries. The government’s strategy is for most provinces to become oil-producing, providing an essential economic aspect to these provinces, attracting labor, and engaging local companies. This round aligns with the ministry’s vision to enhance production capacities, compensate for depleted oil quantities, and search for gas sources.

A total of 22 international companies, most of which are Chinese, applied for the project. Fourteen contracts have been awarded to seven companies, covering 12 Iraqi provinces, and the contracts will be activated in the coming days.

After 14 years of involvement in the first through fifth licensing rounds, the Ministry of Oil has identified obstacles and weak points. Therefore, the economic model for the fifth and sixth round supplements differs from the previous four rounds, which had a fixed profit margin per barrel. This posed a challenge when the global barrel price dropped. These contracts are based on profit-sharing, and in most cases, Iraq’s net profit from these contracts will not be less than 90% of the total profits. There are high, medium, and low economic incentives.

For high-level contracts, our profit will exceed 90%; for medium-level contracts, it will range from 85% to 90%; and for low-level, from 80% to 85%. In previous rounds, we paid on a per-barrel basis.

Chinese companies have proven their competence, equaling European firms, which tend to prioritize high profitability with minimal risk. In contrast, Chinese companies possess both high profitability and risk tolerance. In these contracts, our partners share part of the risks, such as exploratory drilling, unlike in the first to fourth rounds, and they will strive to reduce costs.

When selecting companies, we considered technical expertise, financial standing, experience in HSE, and workforce expertise, including companies like Zipik, UGE, and ZhenHua.

The Ministry of Oil has two main focuses in the gas sector: eliminating flared gas and increasing gas production capacities.

We aim to achieve self-sufficiency by 2030, with the goal of becoming a gas-exporting country.

A simple project in Basra creates approximately 1,000 job opportunities in addition to engaging local companies.

We seek to develop local companies such as the Iraqi Drilling Company, and I believe that KAR, an Iraqi company, has made significant strides in the Iraqi industry, which we can support and evaluate, especially since major international companies like ExxonMobil have not added much to our needs or have withdrawn.

We will start implementing these contracts within one or two months.