The February issue of Geotimes takes a look at the complicated issues surrounding Iraq’s oil exploration and production.

Though oil prices have doubled and Iraq boasts the largest untapped oil reserves in the world, the instability that comes with war, attacks on infrastructure and outdated technology in Iraq have led to the lowest reserve-to-production ratio of all oil-producing countries.

Currently Iraq produces 2.0 million barrels per day (bpd), down from an average of 2.6 million prior to the invasion in 2003. Exploration and development in Northern Iraq could easily increase production by 100,000 bpd.

The cost? A ridiculously low $25 to $75 million. However, the U.S. Energy Information Administration (EIA) says there were 400 oil infrastructure attacks in Iraq between April 2003 and May 2007. That's without roadside bombs, non-oil related terrorist attacks or the Turkish troops probing the northern part of the country.

Gal Luft, executive director of the Institute for the Analysis of Global Security in Washington, D.C., said, “There needs to be a sense that there is no back-sliding on security,” he says. “If international oil companies see that the region is moving toward greater security, they can say ‘things are looking rosier’ and can take baby steps toward investment.”

In the interim, the Kurdistan Regional Government has started the process of setting up oil exploration and production agreements with smaller foreign oil companies but these agreements are in direct opposition to the wishes of the central government and may not have any legal standing without a country-wide Hydrocarbon Law - the central government has even said they will be blacklisted.

The Hydrocarbon Law would be designed to protect the investment of oil companies, primarily from nationalization after work is completed - but it also has stipulations on how much authority oil companies would have independent of the government. Estimates are that up to 70% of Iraqis are against the idea.

They're right. It sounds a lot like having a UN headquarters in their country.

Article: Megan Sever, Oil and Politics in Iraq, Geotimes, February 2008.