OPEC’s second-largest oil producer, Iraq, is looking at alternative revenue streams as the volatility in international crude oil prices makes its budget income unpredictable.
The finance committee at Iraq’s Parliament said on Monday it was looking to boost non-oil revenues to make government revenues more reliable and predictable.
More than 90 percent of Iraq’s government revenue comes from oil, which makes one of OPEC’s top producers vulnerable to any decline in oil prices.
“Iraq relies heavily on oil to boost its revenues, as it is the primary source of funding for the state's general budget. Therefore, it is necessary to identify and increase non-oil revenues in the budget,” Atwan al-Atwani, chairman of the finance committee at the Parliament, told Shafaq News Agency on Monday.
“As members of the Finance Committee, we are not reassured by the instability of oil prices. We are working to strengthen non-oil revenue collection to support the Iraqi budget,” the politician added.
In the short term, Iraq’s oil revenues could slide as the country reduces its crude oil exports in an effort to increase its compliance with the OPEC+ cuts.
Iraq has been overproducing above its OPEC+ quota for months and has pledged to compensate for the excess output.
Crude oil exports from Iraq were reduced to around 3.3 million barrels per day (bpd) in August in a boost to the country’s compliance with OPEC+ supply curbs. This was down from 3.48 million barrels daily in July and 3.41 million barrels daily in June.
Iraq, which is the second-largest producer in OPEC, is a regular laggard in production control deals in the cartel because of its overwhelming dependency on oil revenues as a source of financing for the state.
In a bid to boost those, earlier this year the government in Baghdad changed its oil and gas investment regime from technical service contracts to profit-sharing agreements as it sought to attract more fresh investment to its energy sector.
By Charles Kennedy for Oilprice.com