Academic journal article Global Economic Observer

The Situation of Iraqi Oil Industry and Its Prospects

Academic journal article Global Economic Observer

The Situation of Iraqi Oil Industry and Its Prospects

Article excerpt

Introduction

Iraq is now a major player on the world oil market and was able to restore a large part of its production capacities and to resume a robust economic growth despite the violence, teiTorist activities and heavy political disputes. The former forecasts for oil production proved to be too optimistic but Iraq will soon become a very important oil producer and a country with a more diversified economic structure. Iraq is investing a lot of funds in oil exploration, exploitation and processing, petroleum products distribution and export facilities and intends to develop petrochemical sector, other processing industries, agriculture, commercial and public services, social fields. Iraq intends to make a good use of high gas resources and to export a large part of its production. Privatization and upgrading of oil and gas industry is made with the support of important foreign investors, like Chinese ones, but domestic capital will play an essential role in the future economic development.

I present some medium term priorities, focused on the increase of oil and gas production and on exports too, but some important directions for a long term vision are based not only on oil sector but also on institutional and legislative building, on market institutions and forces, on a better micro and macro management of economy (a better governance at all levels), on the promoting and financing scientifical and technological activities.

Iraq needs good relations not only with USA, that practically controls many economic activities in Iraq, but also with other countries, like its traditional partners from Europe and Asia, among them I could mention Romania, which enjoys great respect and appreciation in Iraq.

1. Reform of oil sector

After removal of Saddam Hussein, the oil production sector and other sectors of Iraqi economy came under US control, that together with the new Iraqi governments have failed so far to develop a clear and solid economic policy either on short, medium or long term. In order to rebuild Iraq, affected by several major conflicts, it is required the normal operation of the oil sector for creating an important flow of oil revenues, this imposing the concentration of Iraqi efforts in the next years for rehabilitating and renewing the oil production system in order to reach at least the level attained before 1990. To achieve this

objective it is necessary to stop the decay of the oil industry, the state being in need of services of the foreign companies in the drilling, development, construction, technology, management activities, etc.

Reform in the oil sector implies the recovery of the total structure of this sector and it may not be valid only for the parent company (National Oil Company), but it has to consider the cooperation of domestic private sector with external private sector participating in oil discovery processes, development and production, by means of carrying out the outsourcing of services from oil industry by the parent company and by establishing of some services companies. These satellite companies require the conclusion of contracts with foreign companies working in the oil field, in order to improve the oil modem processing technology as well as to ameliorate the modem management processes, organization, administration and management of companies from this field.

For upgrading the petroleum sector at an appropriate level to ensure its competitiveness one should greatly stimulate the domestic and foreign investments. To ensure the domestic investments it is seen as the potential source the substantial income provided by the oil sector, and for foreign ones it is needed a strong government and business environment capacity to attract foreign investment for developing the oil sector.

There were considered two variants of Iraqi oil policy reform (A1 Dulaimi Haidar Ali, 2009): (1) On the medium terni, i.e. 5-10 years, the focus must be on the guidelines for providing of all financial, economic and human resources under the intensive program for taking Iraq out of current crisis, and removing the heavy legacy left by the former regime of Saddam Hussein and also by large destructions due to former military actions and stopping terrorist activities, especially in Baghdad area. …

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