Iraq oil sector is largely underdeveloped due to years of conflict and sanctions. However, the country’s oil sector is promising as there are vast oil reserves.
The Iraqi government, understanding that foreign investments can help to develop the oil sector, has become more and more open over the years. The followings are barriers to entry according to market research Iraq.
Slow Rates of Recovery
The first barrier to entry in the Iraqi oil sector is the slow rates of recovery. Decades of abuse, neglect, and sanctions have set the oil sector back.
The leading industry rates are 50%, while the Iraqi oil sector rates of recovery are less than 20%. This puts the oil sector at a disadvantage.
On one hand, the slow rates of recovery open provide the opportunity for private sectors, domestic and foreign, to invest. Iraq is also becoming more open to foreign investors.
On the other, the investments cost a lot of money as technologies and foreign know-how must also be obtained to recover the industry and might take years before return on investment.
Infrastructure Constraints
Perhaps the largest barrier entry to the oil sector is the infrastructure constraints.
After suffering from conflicts and sanctions for decades, the infrastructure of the Iraqi oil sector is underdeveloped.
The most notable infrastructure constraints based on market research Iraq are in the Northern exports, Southern exports, and common seawater supply project.
- Northern exports
Most of the country’s major cure oil pipelines are in the north. Currently, these pipelines are inoperable. Due to conflict and war, these pipelines have to be rehabilitated.
However, it would take a huge amount of investment and years of rehabilitation. Moreover, due to the unstable environment along these pipelines, operations are unlikely to be resumed in the foreseeable future.
- Southern exports
Over the last several years, storage infrastructure and onshore pumping in the south have been expanded. The Khor al-Amaya and Basra ports are operating, albeit below their capacity.
This underperformance is caused by insufficient maintenance and wars. Since 2015, the capacity has been expanded and to some extent, alleviated some of the infrastructure constraints. Further capacity expansions are still required.
- Common seawater supply project
To increase the production scale, the Iraqi oil sector requires an increase in water injection and natural gas.
Both of these are needed so reservoir pressure can be maintained in order to boost oil production as well as increase the recovery rates. At the moment, Iraq’s water and natural gas are not sufficient enough for this.
Political Dynamics
The political dynamics within Iraq also serves as a barrier to entry in the Iraq oil sector. In Iraq, there is a quota-sharing system where the state and institutions are divided based on sectarian lines and ethnicity.
Often times, the key positions in strategic sectors, including the oil sector, are filled with people with little experience, thus leading to mismanagement.
Closing
These are the barriers to entry in the Iraq oil sector according to iraqmarketresearch.com as a company that focuses on research about market research and Business Entry in Oil Sector.
With such vast oil reserves, Iraq oil sector is still lucrative for investors even with the barriers to entry.
Also, Iraq is becoming more open towards foreign investments and companies, thus making it easier for foreign investors to enter the industry.
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