As Russia stays occupied with its battle in Ukraine, Iran focuses on defending its territory against U.S. and Israeli attacks, and China maintains its involvement in both conflicts under the bar that would set off direct battle with America, Washington is leveraging its place in Iraq. These efforts by the U.S. and its allies have taken on further urgency as Iraqi Prime Minister Ali al-Zaidi announced last week that the nation plans to raise oil manufacturing to between 8 million barrels per day (bpd) and 10 million bpd within six years — so the U.S. and its allies need to be best positioned to benefit from that. So, what has Washington been up to in latest weeks and why?
Despite the latest injury finished to its oil sector by the ongoing battle in the Middle East, Iraq has 4 key qualities that all three world powers stay eager to use to their own benefit. First, it is still one of the greatest oil prizes in the world, with a very conservatively estimated 145 billion barrels of proved crude oil reserves (practically 18% of the Middle East’s whole, and the fifth greatest on the planet), according to the Energy Information Administration. It is extraordinarily doubtless that it holds much more oil than this, and the US$2-4 per barrel lifting value is the joint lowest in the world, along with Iran and Saudi Arabia. Second, it occupies the geographical coronary heart of the area, mendacity west of Iran, north of Saudi Arabia and Kuwait, east of Jordan and Syria (with its long Mediterranean shoreline offering access to further vital sea routes), and south of Turkey (affording an entry into the European continent). Third, it stays a key member of the ‘Shia Crescent of Power’ geopolitical arc that stretches from Iran through Iraq, Syria, and Lebanon, where Shia communities and Iran-backed teams exert important affect over regional politics, economics, and security. And fourth, it has for years been the key conduit through which Iran has been in a position to transfer its own sanctioned oil out into the world under the guise of non-sanctioned Iraqi oil, which has ensured its financial survival, despite swingeing worldwide sanctions.
Related: Satellite Images Show Seven Tankers Loading Iraqi Crude at Once
Following the U.S.’s unilateral withdrawal from the Joint Comprehensive Plan of Action (JCPOA, or colloquially ‘the nuclear deal’) in 2018, China and Russia moved rapidly to exploit perceived American weak spot across the Middle East. In Iraq’s case, Russia had successfully seized control over the nation’s semi-autonomous Kurdistan Region in the north through three initiatives analysed in full in my newest e book on the new world oil market order. China had finished a related job in the south of the nation through two wide-ranging cooperation offers in 2019 and 2020 — the ‘Oil for Reconstruction and Investment’, which allowed Chinese companies to invest in infrastructure tasks in Iraq in exchange for oil, and the equally all-encompassing ‘Iraq-China Framework Agreement’, as also absolutely detailed in that e book. The upshot of these methods was that at the starting of Donald Trump’s second presidency in 2025, Russia held sway over much of northern Iraq’s oil sector, while Chinese firms managed around 34% of Iraq’s confirmed reserves and two-thirds of its full-capacity manufacturing. China was also busy linking collectively the particular person items in southern Iraq’s oil jigsaw that it had quietly established through dozens of low-key ‘contract-only’ offers by comparatively unknown Beijing-directed companies into a full exploration-production-refinery-export hub infrastructure that threatened to depart the U.S. excluded from key future exploration and manufacturing selections.
Trump’s workforce at the starting of the second time period moved to neutralise several of these levers of affect over Iraq by Russia and China, starting with sanctions that saw Russian firms successfully pressured out of the Kurdistan Region, as absolutely analysed by OilValue.com. The U.S. also fired sanctions warning photographs at Beijing over Iran and Iraq, while at the same time Western companies secured key oil discipline and infrastructure offers across the north and south of Iraq. In the same context, two American oil and gasoline giants in latest weeks have moved to consolidate this benefit, in the form of ConocoPhillips and Chevron. The former has agreed to purchase a 42% curiosity in BP Energy Company of Kirkuk Limited from British oil and gasoline supermajor BP, supporting the redevelopment of 5 producing oil fields in the Kirkuk space of northern Iraq — the Baba dome (of the Kirkuk discipline), the Avanah dome (of the Kirkuk discipline), the Bai Hassan discipline, the Jambur discipline, and the Khabbaz discipline. This adopted the activation by BP on 2 October last 12 months of the US$25 billion five-pronged oil and gasoline megadeal, which is concentrating on a preliminary manufacturing goal of 328,000 barrels per day (bpd), according to a senior source who works carefully with Iraq’s Oil Ministry, completely spoken to by OilValue.com at the time. This is expected to rise to at least 450,000 bpd within the next two to three years, and then to be reassessed with a view to an increase in output and plateau manufacturing figures. The lifting value of many of these barrels will be at or close to Iraq’s average of US$2-4 pb, and the project is set to run 25 years, although the contract will then be open for renewal. Although the 5 fields are already estimated to maintain up to 9 billion barrels of oil reserves, these are very conservative estimates, according to the Iraq source. “There’s at least another eleven or twelve billion barrels across the near surrounding area, and possibly much more,” he underlined lately. There are much broader geopolitical implications in this deal too. Beijing and Moscow have long labored for Kurdistan to be subsumed into a single unified Iraq, ruled out of Baghdad, with the West pushed out of the nation completely. As a very high-ranking official from the Kremlin completely revealed to OilValue.com some years in the past: “By keeping the West out of energy deals in Iraq, [Russia and China will see] the end of Western hegemony in the Middle East will become the decisive chapter in the West’s final demise.”
Chevron, meanwhile, is transferring ahead with two of southern Iraq’s largest oil fields. Following the implementation of main sanctions by the U.S. and Great Britain, Russia’s Lukoil withdrew from the supergiant West Qurna 2 discipline, leaving the approach open for the U.S. firm. The discipline, situated 65 kilometres northwest of the southern port of Basra and with roughly 14 billion barrels of reserves in place, had been steadily producing around 400,000 bpd — about 9 per cent of Iraq’s whole oil manufacturing at that time — under the operation of Lukoil, which held a 75% stake in the discipline (the the rest held by Iraq’s state-run North Oil Company). The development plan was to increase crude oil manufacturing to 480,000 bpd in Phase 2, and then to add another 650,000 bpd to the whole in Phase 3, which would focus on the deeper Yamama formation. The final goal of 1.13 million bpd might seem high to some (although the unique goal was 1.2 million bpd), but it is completely justified both by US geologists when they were on the ground during the US occupation and by varied worldwide oil firms. Additionally helpful to Chevron’s prospects here, and to Iraq’s goal of attaining over 6 million bpd of oil manufacturing by 2029, are the synergies that will be accessible to the U.S. firm from other Western majors now in operation again across the nation. Not the least of these is the Common Seawater Supply Project (CSSP), which includes taking seawater from the Persian Gulf and transporting it to oil manufacturing services to increase strain at key oil reservoirs, as detailed in full in my newest e book on the new world oil market order. The second oil discipline to be developed by Chevron is Nasiriyah, for which it also signed an addendum to a heads of settlement letter a few days in the past. Situated in southern Iraq’s ThiQar province, the thought of developing the 4.36 billion-barrel Nasiriyah oilfield has been significantly mooted by each of the speedy succession of governments in Iraq since it was found by the Iraq National Oil Company in 1975. These plans have variously been for the standalone development of the oil discipline or its development within the broader scope of the ‘Nasiriyah Integrated Project’ (NIP) that also contains the corollary construction of a 300,000-bpd refinery. All main plans stalled in one approach or another, but last week’s signing of the settlement with Chevron alerts that a sustained and substantial development of Iraq’s hidden hydrocarbon gem may finally be underway, again aided by the parallel development of the CSSP.
By Simon Watkins for Oilprice.com
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