Iraq to cut oil spending after fall in crude prices

• Expected budget deficit
• Reducing oil projects spend
• Increasing crude oil production

Iraq is seeking to cut operational spending on oil projects while trying to maintain investment in increasing crude production, following a steep fall in prices, the official news agency reported on Tuesday.

Prime Minister Mohammed Shia al-Sudani sent a letter to the oil ministry and state-owned oil companies asking them to reduce spending on projects and cancel or freeze others, the agency said.

But Sudani stressed in his letter that the spending cuts must not affect plans which aim to increase the Arab country’s oil output capacity.

“Al-Sudani instructed the oil ministry to revise operating and investment budgets, including the licensing round budgets, with the aim of reducing expenditures by eliminating, postponing or reducing unnecessary items, provided they do not affect production quantities,” al-Sudani’s office said in the letter which was published by the local press.

The oil ministry has asked oil companies to revise their operating budgets and postpone unnecessary items, including licensing round budgets, the letter said.

The Iraq National Oil Company has a number of subsidiaries including the North and Basra Oil Companies, which have geographical remits, in addition to Somo, the state oil marketing agency.

Over the past two years, Iraq has awarded more than 20 oil concession contracts to foreign companies within the licensing rounds five and six. A large proportion of the contracts has been awarded to Chinese companies.

Iraq, which controls the world’s fifth largest proven oil deposits, is seeking to boost its crude output capacity to more than 6 million barrels per day from around 4.5 million bpd, including output by the semi-autonomous Kurdistan region.

Iraq’s 2023-2025 fiscal plan is based on an average oil price of $70 a barrel. 

• Iraq targets oil exports to Africa in expansion plan
• BP to develop Iraq oil fields at potential cost of $25bn
• Iraq risks higher budget deficit after oil sales fall short

Mudhar Saleh, an adviser to al-Sudani, said last month that the 2025 budget is projected to record a deficit of 64 trillion dinars ($49 billion) but that the gap will widen if prices fall. Brent was trading at $66.30 a barrel on Tuesday.

“It [the deficit] will be financed through domestic sources… It could rise if oil prices remain below $70 a barrel and Iraq’s crude exports fell below 3.4 million barrels per day,” Saleh said.