In contrast to the International Energy Agency's forecast for the future of oil, OPEC predicts a 24 percent increase in energy demand by 2050, primarily driven by non-OECD countries, with India and China being the main contributors to this surge. According to OPEC, coal will be the only energy source to see a decline in demand over the next 25 years, while global daily oil demand is expected to reach 120 million barrels per day.
In 2023, according to Iraq’s revenue and expenditure report, 93% of the country’s total revenue emanated from oil, amounting to 125.8 trillion dinars. In contrast, non-oil revenue stood at just 9.7 trillion dinars, or 7% of the total, a sharp deviation from the budget’s initial projections for oil and non-oil revenues.
This $800 million project, which is over three-quarters complete, is now abandoned or expected to be completed by the end of this year. This analysis explores whether the increase in gas production, which has significant demand both inside and outside the Kurdistan Region, represents an opportunity or a challenge for the region's future.
The country’s rapid rise from Third World status to a global superpower, lifting 800 million people out of poverty within a single generation (World Bank, April 1, 2022)[ii], serves as a model for developing nations. Nevertheless, developing countries are eager for the changes brought by China’s infrastructure initiatives, but China’s approach to assistance differs from others as Chinese experts emphasize. “We’re not like the Americans; we can’t offer help for free because our country is still developing,”. However, with long-term loans and Chinese workforces, they believe they can assist in building infrastructure abroad. This duality makes China's presence in developing countries both an opportunity and a potential threat.
The cost of producing a barrel of oil varies by country, field, and management model. For instance, it costs $24 per barrel in the United States and $21 in Norway. In Nigeria, recent contractual changes have increased production costs from $28.90 to $48 per barrel.
There is daily talk in Iraq and the Kurdistan Region about projects costing millions of dollars, as foreign investors have shown their full readiness to invest in these projects. Still, in reality, these projects have nothing but names. Even projects that have already signed their contracts have not been yet constructed like the project of Faw Port, Total Energy Deal, building the headquarters of the Central Bank of Iraq, and also the Chinese project in the Kurdistan Region named “Happy City”.
An annual budget consists of the collection of revenues and their redistribution towards expenditures. The main principle of budgeting is to maintain a balance between revenues and expenditures by increasing revenue sources and reducing expenditures. However, in Iraq, this has been the opposite. Over the past two decades, for example, expenses have increased 29-fold, while revenues have increased only eight-and-a-half times.
On May 22 and 23, 2024, Mahmoud Baban, a research fellow at Rudaw Research Center, speaker at the Second Kurdish Studies Conference, organized by the London School of Economics and Political Science (LSE), the University of Sheffield, Atlantic Fellows for Social and Economic Equity (AFSEE), and Bloomsbury Publishing in Sheffield.
In this round, 22 companies from 13 countries indicated readiness to invest in Iraq's oil, gas, and joint fields, but only Chinese and Kurdistan Region companies secured contracts with profit shares ranging from 6.67% to 32%.
The upcoming years are expected to witness the completion of over 47,000 housing units, adding to the existing stock. Notably, the cumulative number of housing units constructed in the central area of Sulaimani province since 2006 totals 90,000 units.
The Iraqi Ministry of Electricity has reiterated its intention to purchase gas from the KRG in the upcoming months. Dana Gas previously announced the completion of an additional 250 million cubic feet of gas production, slated for availability in the second quarter of this year. However, it remains uncertain whether this supply will be allocated for power plants within the Kurdistan Region or Iraq at large.
Throughout the suspension period, the estimated loss surpasses $11 billion if the Kurdistan Region were to sell its own oil independently, escalating to $13 billion if Baghdad were to market it at the price of Iraqi oil exports in 2023.
This rapid acceleration in housing development is not confined to Erbil; it is a trend observed across the Kurdistan Region. In Sulaimani, for instance, the number of real estate investment projects currently underway has surged two to threefold compared to previous years, reflecting the region's robust growth and burgeoning housing market.
In terms of revenue, the budget projected Iraq's total revenue in 2023 to reach 134.5 trillion dinars, comprising 117.2 trillion dinars from oil revenue and 17.3 trillion dinars from non-oil revenue. However, according to the Ministry of Finance's annual report, Iraq's total oil and non-oil revenues amounted to 135.6 trillion dinars, with oil revenues at 125.8 trillion dinars and non-oil revenues at 9.7 trillion dinars.
China's trade with Iraq has consistently expanded year after year, with recent figures nearing $50 billion, representing over two-thirds of Iraq's exports to China. Moreover, China's investments in Iraq's energy and real estate sectors have surpassed those of neighboring countries over the last two decades.
