PrintIraq has the world’s third largest proven petroleum reserves and some of the lowest extraction costs, although just a fraction of its known fields are in development.
According to the March 2007, review by the International Monetary Fund (IMF), in 2006, crude oil export revenues represented around 60 percent of GDP and 89 percent of government revenues. In 2006, the U.S Department of Energy’s Energy Information Administration (EIA) reported that Iraq was the world’s 15th biggest oil producer and Iraq meets approximately 94 percent of its energy needs with petroleum.
Iraq’s use of abundant natural gas resources and hydropower is limited. According to the findings of the December 2006, Iraq Study Group (ISG), led by former Secretary of State James A. Baker and former Congressman Lee H. Hamilton, the stabilization of Iraq is highly correlated with Iraq’s economic success or failure, which in the medium-term is highly dependent on its hydrocarbons industry. 
Oil
Experts agree that Iraq may be one of the few places left where vast reserves, known and unknown, have barely been exploited. After more than a decade of sanctions and two Gulf Wars, Iraq’s oil infrastructure needs modernization and investment.
Despite a large reconstruction effort (including Iraq Relief and Reconstruction Fund (IRRF) support of $1.72 billion), the industry has not been able to meet hydrocarbon production and export targets since 2004. According to the January 2007, Special Inspector General for Iraq Reconstruction (SIGIR) report, Iraq’s petroleum sector faces technical challenges in procuring, transporting and storing crude and refined products, as well as managing pricing controls and imports, fighting smuggling and corruption, improving budget execution, and managing sustainability of operations. Oil production has not recovered to pre-war levels, and parliament and cabinet officials are working to map out investment and ownership rights that will help move the industry forward.
Another challenge to Iraq’s development of the oil sector is that resources are not evenly divided across sectarian-demographic lines. Most known hydrocarbon resources are concentrated in the Shiite areas of the south and the ethnically Kurdish north, with few resources in control of the Sunni minority (Click HERE to link to oil resources maps). For this reason a legal framework for investment in the hydrocarbon sector remains a main policy objective.
According to reports by various U.S. government agencies, multilateral institutions and other international organizations, long-term Iraq reconstruction costs could reach $100-billion or higher, of which it is estimated that more than a third will go to the oil, gas and electricity sectors. In addition, the World Bank estimates that at least $1 billion in additional revenues needs to be committed annually to the oil industry just to sustain current production.
Oil Reserves
According to the Oil and Gas Journal, Iraq’s proven oil reserves are 115 billion barrels, although these statistics have not been revised since 2001 and are largely based on 2-D seismic data from nearly three decades ago. Over the past two years, multinational companies, at the request of the Government of Iraq (GoI), have reexamined seismic data and conducted comprehensive surveys of Iraq’s hydrocarbons reserves in locations throughout the country.
Geologists and consultants have estimated that relatively unexplored territory in the western and southern deserts may contain an estimated additional 45 to 100 billion barrels (bbls) of recoverable oil. While internal Iraqi estimates have ranged into the hundreds of billions of barrels of additional oil, the seismic data under review by a host of international fir
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