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Iraq: Energy
Country Study > Chapter 3 > The Economy > Energy


Possessing the third-greatest oil reserves in the world, Iraq has the resources for complete energy independence. By world standards, production costs for Iraqi oil are relatively low. However, long-term neglect and mismanagement of the petroleum industry by the Baathist regimes left the industry’s infrastructure in poor condition. The lifting of international sanctions in 2003 allowed repairs to begin. However, since 2003 oil pipelines and installations have been sabotaged persistently, and in mid-2006 output had not regained pre-2003 levels.

In 2004 Iraq had eight oil refineries, the largest of which were at Baiji, Basra, and Daura. Sabotage and technical problems at the refineries forced Iraq to import fuels, liquid petroleum gas, and other refined products from nearby countries. In October 2004, for example, Iraq spent US$60 million for imported gasoline. In 2005 and 2006, regular sabotage of plants and pipelines reduced export and domestic distribution of oil, particularly to Baghdad. Nationwide fuel shortages and power outages resulted. In 2004 plans called for increased domestic utilization of natural gas to replace oil and for use in the petrochemicals industry. However, because most of Iraq’s natural gas output is extracted together with oil, growth in gas output depends on developments in the oil industry. An expansion program in that industry for 2006 called for an expenditure of US$2 billion on new oil pipelines, storage facilities, export terminals, refineries, and wells, together with repair of damaged infrastructure, improved security, and streamlining of the delivery system. The plan would increase oil exports for 2006 to 568 million barrels, compared with the 2005 total of 508 million barrels. However, in 2006 the Ministry of Oil estimated that some US$25 billion was needed to repair damage and replace equipment.

As much as 90 percent of Iraq’s power generating and distribution systems were destroyed in the Persian Gulf War of 1991, and full recovery never occurred. In 2006 Iraq had an estimated 5,000 megawatts of usable power-generating capacity, compared with 8,000 megawatts of demand. This discrepancy led to regular power outages, particularly in Baghdad, and to the importation of power from Iran and Syria. Although 98 percent of houses were connected to the power grid in 2005, for most customers electricity supply was extremely unreliable, and in 2006 factories received only 20 percent of the power needed to operate at full capacity. In 2005 plans called for the construction of several new power plants and restoration of existing plants and transmission lines to ease the blackouts and economic hardship caused by this shortfall, but sabotage and looting slowed expansion. In 2005 the World Bank estimated that US$12 billion would be needed for near-term restoration, and the Ministry of Electricity estimated that US$35 billion would be necessary to rebuild the system fully.

Last Updated: May 1988

Editor's Note: Country Studies included here were published between 1988 and 1998. The Country study for Iraq was first published in 1988. Where available, the data has been updated through 2008. The date at the bottom of each section will indicate the time period of the data. Information on some countries may no longer be up to date. See the "Research Completed" date at the beginning of each study on the Title Page or the "Data as of" date at the end of each section of text. This information is included due to its comprehensiveness and for historical purposes.

Note that current information from the CIA World Factbook, U.S. Department of State Background Notes, Australia's Department of Foreign Affairs and Trade Country Briefs, the UK's Foreign and Commonwealth Office's Country Profiles, and the World Bank can be found on

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Section 52 of 128


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