Iraq, OPEC’s second-largest producer, is one of the world’s largest emitters of gas flaring, a practice that releases usable gas into the atmosphere. Deputy Oil Minister Hamid Younes al-Zobai told a conference in Washington DC that the country is seeking to attract foreign investment, particularly from the US and the West, to develop its gas sector and reduce the polluting practice.
The Oil Ministry is encouraging foreign companies to operate in Iraq and the current government is developing investment plans in cooperation with international companies. The aim is to make Iraq’s gas sector self-sufficient in the next five years, with a particular focus on reducing flaring and increasing gas production.
Initiatives and Investments
High-level Iraqi delegations have visited the United States twice this year to meet with U.S. government officials and private sector companies. These visits resulted in several agreements to develop gas capture projects and reduce the country’s dependence on electricity imports from Iran.
US interests in Iraq are twofold: countering China’s growing influence in Iraq’s energy sector and reducing Iraq’s dependence on Iranian electricity imports, subject to exemptions from US sanctions. Despite efforts, concerns over security and corruption continue to deter U.S. companies from investing heavily in the country.
Impact of Chinese Investments
At the same time, Western reprocessing of Iraq’s energy sector has strengthened China’s control. PetroChina took over as operator of the West Qurna 1 project after ExxonMobil pulled out in 2023, following the sale of its 22.7% stake to Iraq’s BOC. In the latest licensing round in May, Chinese companies won 10 of the 13 available projects, consolidating their presence in Iraq’s oil sector.
A World Bank report released in June showed an increase in Iraq’s oil production in 2023, but only a 1% reduction in flaring. Seven agreements were signed with American companies in April to continue to reduce this practice.
Challenges and Perspectives
Despite the Iraqi government’s efforts to attract investment, challenges remain numerous. Unstable security and endemic corruption pose significant obstacles to the entry and retention of foreign investment. However, economic and governance reforms undertaken by Finance Minister Taif Sami, in collaboration with the US ambassador, aim to create a more conducive environment for investment.
John Calabrese, an assistant professor at American University specializing in foreign policy in the Middle East and East Asia, points out that Chinese companies have established a sustainable and competitive presence in Iraq over the years, giving them a advantage over Western companies.
Perspectives Futures
Iraq continues to navigate a complex energy landscape, seeking to balance international influences while meeting its internal energy needs. Efforts to reduce flaring and increase gas production could not only improve the environment but also strengthen Iraq’s economy by reducing its dependence on energy imports.
