Difficulties facing Oil and Gas Companies in Iraq for 2016
A Look Ahead
Article taken from the Oil and Gas Year, Iraq 2016 Publication, in the Who's Who of the Global Energy Industry section.
What were the big market challenges in 2015?
The conflict with the Islamic State (IS), coupled with the sharp drop in oil prices, placed a strain on Iraq’s 2015 budget. The same constraints apply to the 2016 budget, which was approved by parliament in mid-December 2015. The cost of fighting against IS has been more than 20 percent of the budget, which is considerable. Persistent low oil prices are putting more pressure on Iraq’s economy, which has yet to diversity its revenues away from oil and gas resources.
The oil industry represents around 95 percent of government revenues, 90 percent of which comes from Basra province, which has increasingly been calling for decentralisation and semi-autonomy from the central government. Basra residents have demanded more control over the province’s natural resources and revenues in the face of perceived financial neglect from Baghdad and the uneven distribution of the country’s finances, despite Iraq’s economy relying almost exclusively on the southern oilfields.
Threats from southern political figures to independently export their oil seem to have paid off. In the 2016 budget, the government increased the share of oil revenues afforded to the oil producing provinces of Iraq - with the exception of the Kurdistan region - to $5 for each barrel they produce.