How Iraq rebuilt its oil industry after war

Home to some of the largest proven oil reserves in the world, the industry in Iraq has faced years of immense challenges to its potential.

Decades of war, sanctions and political instability have restricted its ability to both produce and export oil. But the past 15 years have seen a dramatic change.

As the country tried to rebuild following the 2023 US-led invasion, the oil industry in Iraq was supercharged. It now finds itself as one of the most important sectors of the economy and a critical player in the global energy market.

The story of post-war oil recovery in Iraq is one of resilience, international collaboration and complex geopolitics. Oh, and there are a few pipes involved as well.

The impact of 25 years of war on the oil industry in Iraq

The oil sector in Iraq suffered massive, frequent setbacks due to a series of conflicts over 25 years:

• Iran-Iraq War (1980–1988) damaged infrastructure and halted development.
• The Gulf War (1990–1991) saw oil fields set ablaze and facilities bombed.
• Years of UN sanctions (1990s) crippled Iraq’s ability to maintain or modernize oil operations.
• The 2003 U.S.-led invasion and subsequent instability led to further destruction, loss of skilled labour, widespread looting, sabotage and neglect affecting key facilities.

Despite sitting atop nearly 145 billion barrels of proven resources by the mid-2000s, oil production in Iraq had plummeted. The country was in desperate need of rebuilding its society, infrastructure – and its oil.

Laying the groundwork for recovery

After 2003, Iraq took steps to revitalise its oil industry. Three key decisions were central to this:

1) Re-establishing the Ministry of Oil

The Ministry of Oil was reformed to oversee strategy, contracts and coordination with international companies looking to invest in Iraq.

Its success was no mean feat. The Ministry had to overcome political infighting and corruption to become the central body in managing oil production and export growth.

2) Encouraging foreign investment in the Iraq oil industry

Recognising its lack of capital and technical expertise following the aforementioned loss of skilled labour, Iraq opened its doors to international oil companies.

Bidding rounds began in 2009. Unsurprisingly given the untapped resources in Iraq, there was high demand. Major players like BP, Shell, ExxonMobil, Total and Lukoil soon began operating in Iraq under technical service contracts.

3) Reviving major oil fields

Several supergiant oil fields were brought back online as a matter of urgency. Once these facilities were up-and-running again, expansions took place to increase production.

The most notable oil fields – and the companies who operated them – were:

• Ruamaila (BP): The largest oil field in Iraq.
• West Qurna (ExxonMobil and Lukoil): One of the biggest reserves globally.
• Zubair and Majnoon (ENI and formerly Shell): Important contributors to output.

Rebuilding infrastructure and modernising the oil industry in Iraq

The rebuilding of the oil industry in Iraq was not just about oil fields. It required reconstructing an entire ecosystem, making it fit to handle production and distribution. This included:

• Upgrading export terminals in southern Iraq, like Basra Oil Terminal.
• Rebuilding refineries which had been left badly damaged. Baiji underwent significant upgrades following attacks by ISIS.
• Restoring or expanding pipelines to neighbouring countries. Turkey in particular has proven an important export market.
• Modernising storage facilities and metering stations to improve efficiency and transparency, boosting confidence in the industry.

These efforts not only significantly increased production by the oil industry, but they also allowed Iraq to rejoin and influence OPEC negotiations effectively.

Production milestones and economic impact of a rebuilt Iraq oil industry

The growth of the oil industry in Iraq was phenomenal. By the early 2010s, it had become OPEC’s second-largest producer with over 4.5 million barrels per day.

Oil exports became the dominant source of government revenue, at one point accounting for over 90 percent of the national budget.

Global conditions and changes like falling oil prices as well as domestic unrest in Iraq have challenged the industry. Yet despite these issues, the country’s oil output has remained relatively resilient.

Ongoing challenges for the oil industry in Iraq

There remain considerable challenges for Iraq’s oil industry to overcome, if it is to maintain its newfound place as one of the world’s leading suppliers:

• Security threats from remnants of ISIS or militia groups
• Ageing infrastructure in need of further investment, including significant oil refinery pipe repair programmes
• Political instability and tensions between Baghdad and the semi-autonomous Kurdistan Region over control of oil resources.
• Climate change concerns and global energy transition, putting pressure on oil-reliant economies.

Other issues like corruption, bureaucracy and delays in payments from Iraq to foreign firms have made the country a difficult but necessary partner for many IOCs.

The road ahead for the oil industry in Iraq

Looking forward, there are some obvious areas in which the oil industry in Iraq will be looking to strengthen:

• Expand natural gas capture to reduce flaring.
• Improve refining capacity to reduce reliance on fuel imports.
• Attract new investments in both traditional and renewable energy.
• Navigate the delicate balance between economic needs and OPEC production quotas.

With one of the world’s richest untapped reserves, Iraq holds the potential to be an even more dominant force in global energy. Providing it can maintain stability, transparency and long-term planning.

Iraq deserves credit for the success of its oil industry

Rebuilding the oil industry in Iraq after decades of war was never going to be easy. But through a mix of international cooperation, state-led recovery and the sheer value of its reserves, the country has reclaimed a central role in the global oil market.

Iraq’s journey stands as a powerful example of how natural resources – when managed with strategic vision – can help a war-torn nation move toward economic recovery and growth.