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Why Iraq still struggles to attract foreign investors in its energy and transition projects
29/1/2025
10 min read
Feature
After years of conflict, Iraq is struggling to diversify foreign investment in its energy sector, reduce Iranian gas imports, and meet ambitious carbon emission goals by 2030. Regional instability and uncertainty over the foreign policy of new US President Donald Trump are posing further obstacles to the sector’s development. Paul Cochrane reports.
Iraq’s oil production has surged by 71% over the past two decades (from 2000 to 2022), despite the disruption following the US and UK-led invasion of 2003 and years of disorder. As of November 2024, Iraq produced 4.2mn b/d, making it the fourth largest producer in the world, and the second largest in the Middle East after Saudi Arabia, according to the International Energy Agency’s Oil Market Report.
With oil revenues now accounting for more than 90% of its governmental budget, Baghdad is keen to bolster output and utilise the latest Western technologies to reduce methane flaring and better exploit its reserves. But with more than 60% of its oil exports already sent to China and India, and a challenging operating environment, Iraq has offered dwindling appeal to US and Western oil companies.
Indeed, following a visit to Washington DC in April 2024, Iraqi Prime Minister Mohammed Shia’ Al Sudani delayed the country’s fifth and sixth oil licencing rounds to encourage US investors, but attracted minimal interest.