Iraq has announced the discovery of a new oil field in the southern East Baghdad group of fields, potentially adding 2 billion barrels of medium and light crude to the country’s oil reserves.
State-owned Midland Oil Co., in collaboration with EBS (a local subsidiary representing China’s ZhenHua Oil), reported the find after well tests projected an initial output of 5,000 barrels per day (B/D), according to the Iraqi News Agency.
Boosting Iraq’s Oil Reserves & Production Goals
The discovery aligns with Iraq’s strategy to increase its oil reserves to 160 billion barrels, as outlined by Oil Minister Hayan Abdul-Ghani last year. Additionally, Iraq aims to expand production capacity to 6 million B/D by 2028, according to Arabian Gulf Business Insight (AGBI).
However, Wood Mackenzie projects a more conservative estimate, forecasting Iraq’s oil production at 5.5 million B/D by 2030, while its gas output is expected to more than double to 4.4 billion cubic feet per day (Bcf/D) in the same timeframe.
Iraq’s Efforts to Attract Foreign Investment
With oil exports funding over 90% of Iraq’s budget, the government has intensified efforts to attract foreign investors. In early 2024, Iraq offered 30 exploration blocks in its fifth-plus and sixth licensing rounds, with Chinese companies securing most of the bids. However, the recent East Baghdad discovery was independent of these licensing rounds.
OPEC Compliance & Growing Oil Production
As OPEC’s second-largest producer after Saudi Arabia, Iraq holds the world’s fifth-largest proven oil reserves at 145 billion barrels, accounting for 17% of the Middle East’s total reserves (AGBI).
Currently producing 4 million B/D, Iraq has exceeded its OPEC-assigned quota since January 2024. Analysts predict Iraq will increase production by 200,000 B/D by 2026, with growth concentrated in Basra (south), Diyala (east of Baghdad), and Kirkuk (northeast).
Chinese Investment Dominates Iraq’s Oil Sector
Western oil majors have been gradually scaling back operations in Iraq due to political and economic uncertainties, allowing Chinese companies to expand their dominance. According to a January 2025 policy brief by the Netherlands Institute of International Relations, between 50% and 67% of Iraq’s oil output is now linked to Chinese firms, either as investors, producers, or field service providers.
Out of 30 exploration blocks auctioned in spring 2024, Iraq awarded 10 licenses, with seven going to Chinese firms, while European and Arab companies failed to secure contracts.
Western Oil Majors Making a Comeback
Despite China’s strong presence, Western oil giants are re-entering Iraq’s energy sector:
- TotalEnergies signed a $27 billion deal in 2023 for the Gas Growth Integrated Project, aimed at capturing flare gas in Basrah.
- In December 2024, BP finalized terms with Iraq’s government to redevelop oil and gas fields in Kirkuk, including Baba, Avanah, Bai Hassan, Jambur, and Khabbaz.
- Halliburton is negotiating with Iraq to expand the Nahr Bin Omar oil field’s capacity by 500%, increasing production to 300,000 B/D and capturing 300 million cubic feet of gas per day (MMcf/D).
- Iraq’s cabinet recently approved a heads of agreement with Halliburton to develop Nahr Bin Omar, Nahr Ben Umar, and Sindbad oil fields in Basra.
Meanwhile, Shell retains its 44% stake in Basrah Gas Co., a joint venture with Iraq’s South Gas Co. (51%) and Japan’s Mitsubishi Corp. (5%), which processes associated gas from Rumaila, West Qurna 1, and Zubair oil fields.
Reducing Dependence on Iranian Gas
At a press conference on January 21, Oil Minister Abdul-Ghani announced plans to cut costly gas imports from Iran, which currently supplies one-third of Iraq’s domestic demand.
Key initiatives include:
- Increasing domestic gas production by 190 MMcf/D in 2025, with:
- 140 MMcf/D coming from new gas projects in Basra.
- 50 MMcf/D supplied by TotalEnergies under an emergency agreement with Baghdad.
Conclusion
Iraq’s latest oil discovery reinforces its long-term energy ambitions, aiming to bolster reserves, attract investment, and reduce reliance on imports. While Chinese companies continue to dominate, Western majors are making a cautious return, signaling renewed interest in Iraq’s energy future.