Iraq is a significant producer of oil and natural gas and holds the fourth largest proven crude oil reserves in the world. It is also the largest producer of crude oil in the Organization of the Petroleum Exporting Countries (OPEC). However, due to years of war and international sanctions, much of Iraq’s oil and gas reserves remain untapped.
Nonetheless, Iraq’s economy is heavily dependent on oil income, which accounted for 90% of government revenues and 36% of the country’s GDP in 2018, and is mainly realised through export sales made through the State Oil Marketing Organization (SOMO). It is expected that Iraq’s oil export revenue will decrease following the OPEC+ agreement in April 2020 where Iraq committed to cut oil production in the second half of 2020.
Iraq’s oil sector is therefore central to Iraq’s fiscal position and critical to the vitality of the economy and the ongoing reconstruction efforts of the country, particularly with regards to oil and gas and power infrastructure and development.
In 2021, the Government of Iraq signed an agreement with the World Bank and the European Union to strengthen its institutions and mechanisms of fiscal accountability and oversight at the federal and subnational levels. Among others, it will support transparency and accountability in the oil sector through EITI.
In 2019, Iraq’s Deputy Prime Minister and Minister of Oil Thamer Ghadhban expressed a commitment to publish monthly production and export figures through government websites, national oil companies’ financial statements on their respective websites, and, where companies agree, oil and gas contracts.
Extractive sector data
Top paying companies
Extractive sector management
Tax and legal framework
In Federal Iraq, the extractive sector is governed by the Organization of Ministry of Oil Law No. 101 of 1976 (as amended), Public Companies Law No. 22 of 1997 (as amended), Iraqi Ministry of Industry and Minerals Law No. 38 of 2011, Mineral Investment Law No. 91 of 1988, Investment Law No. 13 of 2006, Crude Oil Refining Investment Law No. 64 of 2007 (amended in 2016), and Income Tax Law No. 113 of 1982 (as amended), and Law No. 27 of 2009 on the Protection and Improvement of the Environment, among others.
The sector is regulated by the Ministry of Oil (MoO), which has central control and oversight over oil and gas exploration, production and development. The MoO has incorporated several national oil and gas companies to manage upstream, downstream, transportation, distribution and marketing activities. Furthermore, the Ministry of Industry and Minerals (MOIM) regulates the extraction and marketing of minerals in Iraq through state-owned entities (SOEs).
In the Kurdistan region, the sector is governed by Iraq Law No. 22 of 2007 or the Oil and Gas Law of the Kurdistan Region. The Regional Council is responsible for formulating the general principles of petroleum policy, prospect planning and field development. Its Ministry of Natural Resources (MNR) is the sole authorised signatory of production-sharing agreements with companies that invest in the exploration of hydrocarbons and mineral resources in the region.
License and contracts
Iraq has been conducting a series of oil and gas licensing rounds since 2009, to award service contracts to international oil companies (IOCs) to explore and develop new and exisiting oil and gas fields. The Petroleum Contracts and Licensing Directorate (PCLD), under the Ministry of Oil (MoO), is responsible for organising the licensing rounds, negotiating with IOCs in the oil and gas sectors, and setting model contracts. The Iraq EITI website provides further detail on the procedure for awarding licenses. The Ministry of Industry and Minerals (MOIM) is responsible for allocating mining and mineral contracts, which are confidential.
The PCLD publishes petroleum contract templates, not the signed contracts. In January 2021, the Deputy Minister of Oil addressed to all companies affiliated with the ministry and PCLD to adhere to the contract transparency policy and to consider contracts for licensing rounds and other related contracts. While the signed contracts are not yet shared with the public, copies of the signed contracts and subsequent amendments are shared with the Iraqi parliament and the Federal Board of Supreme Audit.
Iraq does not have a legal framework mandating the disclosures of beneficial ownership information. While, Iraq EITI has committed to implement beneficial ownership transparency as per its roadmap, no ownership data has been disclosed to date.
The Financial Management and Public Debt Law No. 95 of 2004 (amended) states that all proceeds from the sale or extraction of petroleum, including from the federal government’s production shares and royalties, shall accrue to the budget.
Ninety-five percent of the revenues from the sale of oil and gas are deposited into the Development Fund for Iraq, which is administered by the Prime Minister, Minister of Finance and the Accounting Department General Manager. Pursuant to the UN Security Council Resolution No. 1483 (2003), the remaining 5% of receipts are transferred to a Compensation Fund.
Governorates are entitled to shares of extractive revenue through two types of subnational transfers:
Petrodollar allocations, which are calculated as 5% of either crude oil revenues, refined crude oil revenues, or natural gas revenues produced in the governorate.
A share in Governorates Development Program, in accordance with the governate’s development plan approved by the provincial council. The Federal Budget Act determines an amount to be allocated proportionate to the population of each governorate. The programme aims to finance reconstruction projects across the country.
Iraq EITI is administered by the Iraq Multi-Stakeholder Group (MSG). The MSG is hosted by the Ministry of Oil and chaired by the Deputy Prime Minister of Energy Committee/Minister of Oil. It is comprised of representatives from government, industry and civil society.
Iraq was found to have made meaningful progress in implementing the 2016 EITI Standard in October 2019, following its second Validation. Iraq has fully addressed 10 of the 22 corrective actions identified in its previous Validation, with significant improvements across the 12 remaining actions. The next Validation is expected to commence in January 2023.