Baghdad has approved an increase in Iraq’s crude oil production capacity to as much as 6.5 million bpd by 2022. This compares to a current production capacity of below 5 million barrels and production rates—as reported by the local energy ministry—of around 4.4 million bpd as per its OPEC quota.
Crude oil export income accounts for the bulk of government revenues and is likely to continue to do so for the observable future as diversification options are few and the funds needed for a shift away from oil can only come from oil.
This huge dependence on crude revenues has made Iraq the focus of doubts around compliance with the 2016 OPEC+ production cut deal, with many expecting that the cartel’s number-two producer will be the first to start cheating.
Indeed, Iraq has fallen consistently short of complying with its quota of 4.35 million bpd, but its underperformance has been more than offset by Saudi Arabia and Venezuela. Iraq was also the hardest OPEC member to convince that the cuts were necessary. Now the country is in line, apparently sticking to whatever OPEC decides in terms of further extensions of the deal. At the same time, however, it is planning a tender for 11 new fields later this month.