As the doors opened at the Fourth Erbil Oil and Gas Exhibition this week, attendance from the international oil giants was markedly absent. The once-coveted oil fields of Iraqi Kurdistan are becoming more unsavory in the face of two major issues that are dissuading international oil giants from investing in the Kurdistan oil industry: the Islamic State and the falling price of oil.
45 Billion Barrels
Bloomberg estimates that Iraqi Kurdistan sits on top of nearly 45 billion barrels of crude — a resource that has long been believed to be the key to the Kurd’s financial independence. Recently, the Kurdistan Regional Government’s oil output has reached 448,000 barrels per day.
However, since the self-proclaimed Islamic State invaded Iraq last year, many of these oil fields have been taken over by insurgents and turned into financial resources to fund terrorism. The oil fields that remain in the hands of the Kurds are at risk of being overrun, and oil companies see an increase in risk and waning returns for their investments.
Erbil, the capital of the Kurdistan Regional Government, sits 50 miles from Mosul, the largest city controlled by the so-called Islamic State. Although Erbil, the capital of Iraqi Kurdistan, is relatively safe, oil and gas companies risk the lives of their employees by sending them out into the fields nearby.
Falling Oil Prices
Furthermore, while oil in Iraqi Kurdistan is cheap, and easy to extract, oil prices have fallen by 50% in the past six months. This recent development has further dissuaded investment by large oil companies, who only a year ago, were attending the Erbil Oil and Gas Exhibition.
Strapped for cash, and under assault from the Islamic State, the Kurdistan Regional Government has struck a deal with Baghdad to export 550,000 barrels per day to Iraq in return for their fair share of the Iraqi budget.
While both sides are struggling to meet their end of the agreement, foreign investment isn’t coming any faster. Only one thing is certain — the Islamic State will have to be defeated before the Kurds can start thinking about capitalizing on their vast natural resources.[To Read More Visit US News]