The Republic of Iraq is OPEC's second-largest producer after Saudi Arabia, with crude output typically in the range of 4.0 to 4.5 million barrels per day. Iraq holds the world's fifth-largest proven oil reserves at approximately 145 billion barrels, much of it in undeveloped or under-developed fields that could support substantially higher production with sustained investment. The country has been one of the most consistent OPEC quota overshooters for the past several years, and its production trajectory is one of the most-watched variables in OPEC+ analysis.
Understanding Iraqi oil requires understanding two distinct production regions operating under different governance: the federally controlled south, dominated by the Basrah-area fields and exported through the Persian Gulf, and the Kurdistan Region in the north, where the Kurdistan Regional Government has historically operated as a quasi-independent producer with separate export arrangements that have been the subject of long-running legal and political disputes.
The State Oil Marketing Organization
The State Oil Marketing Organization, almost universally referred to as SOMO, is the Iraqi government entity responsible for marketing federally controlled crude oil exports. SOMO sets monthly Official Selling Prices (OSPs) for Iraqi grades, allocates export volumes among long-term contract customers and spot buyers, and represents Iraq in OPEC and OPEC+ deliberations on production policy.
SOMO's pricing follows the standard Middle Eastern OSP model: monthly differentials to regional benchmarks (Platts Dubai for Asian destinations, ICE Brent for European destinations, ASCI for U.S. destinations). Iraqi OSPs are a closely watched signal of how Iraqi marketers view forward market conditions and have moved Brent and Dubai pricing on multiple occasions when surprise adjustments diverged from market expectations.
The actual upstream production operations are conducted by international oil companies under technical service contracts (TSCs) signed in the post-2003 contract licensing rounds. BP, ExxonMobil, Eni, TotalEnergies, Lukoil, CNPC, Petronas, and others operate major Iraqi fields under arrangements that pay a per-barrel service fee rather than granting equity in produced crude.
The Major Producing Fields
Federally controlled Iraqi production is concentrated in the southern Basrah region:
- Rumaila — Operated by BP, one of the largest producing fields in the world with production around 1.4 million barrels per day.
- West Qurna 1 — Operated by ExxonMobil (with subsequent partner changes), production around 460,000 barrels per day.
- West Qurna 2 — Operated by Lukoil, with growth to several hundred thousand barrels per day.
- Majnoon — Initially developed by Shell, subsequently transferred to Basrah Oil Company operation.
- Zubair — Operated by Eni, several hundred thousand barrels per day.
- Halfaya — Operated by CNPC, several hundred thousand barrels per day.
Production is gathered through pipelines to the Basrah Oil Terminal and the Khor al-Amaya terminal in the northern Persian Gulf for export. The southern Iraqi export infrastructure is the largest single export complex in the country and has been the subject of major capacity expansion investment over the past two decades.
Northern Iraq's federally controlled production from Kirkuk-area fields has historically been exported via the Iraq-Turkey Pipeline to the Mediterranean port of Ceyhan, but this route has been chronically disrupted by political and operational issues — see the Kurdistan section below.
Iraqi Export Grades
Iraq markets several distinct grades through SOMO:
- Basrah Heavy — Approximately 24° API, 4.0% sulfur. The heavier southern export grade.
- Basrah Medium — Approximately 28° API, 3.0% sulfur. The largest single Iraqi export grade by volume. Constituent of the OPEC Reference Basket.
- Basrah Light — Approximately 32° API, 2.0% sulfur. A lighter southern grade, though "light" is somewhat misleading by global standards.
- Kirkuk — Northern crude, approximately 36° API and 1.9% sulfur. Historically exported via Ceyhan; current flows have been substantially constrained by pipeline disputes.
The 2021 introduction of separate Basrah Heavy and Basrah Medium grades — replacing the previous undifferentiated Basrah Light — was an important commercial innovation. The grade segmentation more accurately reflected the actual quality of Iraqi exports to different destinations and allowed Iraqi marketers to capture better realized pricing.
The Kurdistan Regional Government Dispute
The Kurdistan Region of Iraq, with its capital at Erbil, operates with substantial autonomy under the 2005 Iraqi Constitution. The Kurdistan Regional Government (KRG) has its own Ministry of Natural Resources and has signed production-sharing contracts with international oil companies — including DNO, Genel Energy, Gulf Keystone, and others — for the development of fields in Kurdish-controlled territory.
The dispute with the federal government centers on two issues:
Contract authority. The federal government has historically argued that only Baghdad has constitutional authority to sign upstream contracts, making KRG production-sharing contracts legally invalid. The KRG has argued that the constitution gives Kurdistan-region authorities co-equal authority over natural resources in their territory.
Export marketing. KRG-area production has historically been exported via a Kurdish-built pipeline connecting to the Iraq-Turkey Pipeline at the border, with marketing handled directly by the KRG rather than through SOMO. The federal government has contested both the legal authority and the revenue accounting of this arrangement.
The dispute was substantially escalated by a 2023 International Chamber of Commerce arbitration ruling that Turkey had violated the Iraq-Turkey Pipeline agreement by accepting KRG-marketed crude. The award required Turkey to pay damages to the Iraqi government, and Turkey responded by shutting down the pipeline. The shutdown removed approximately 450,000 barrels per day of northern Iraqi exports from global markets — a major event for Mediterranean refiners that had depended on Kirkuk grade.
The pipeline has been the subject of intermittent reopening discussions but has not returned to sustained operation as of mid-2026. The dispute illustrates the structural fragility of Iraqi production growth, even when underlying field economics support expansion.
OPEC+ Quota Frictions
Iraq has been among the most consistent OPEC+ quota overshooters since the alliance was formed in 2016. Iraqi production has routinely exceeded stated quotas by 100,000 to 400,000 barrels per day, with the gap varying by month and largely depending on which fields are operating at maximum and which are temporarily constrained.
The overshoot reflects several structural factors:
- Federal-KRG production reconciliation. The KRG operates production-sharing contracts that do not adjust output based on OPEC quotas. KRG production is therefore quota-exempt from the contract structure perspective even when SOMO is required to comply on its federal volumes.
- Field operating economics. Iraqi IOC operators are compensated on a per-barrel service fee basis. Reducing production reduces their earnings, creating commercial friction around discretionary quota compliance.
- Iraqi fiscal pressure. Iraqi government budgets are heavily oil-dependent, and Baghdad has consistently faced pressure to maximize revenue regardless of OPEC commitments.
- Production measurement disputes. Different methodologies for measuring production (wellhead, fiscal metering, export terminal) produce different numbers, allowing Iraqi authorities to dispute compliance assessments.
OPEC+ has periodically required Iraq to submit "compensation cuts" — additional production reductions to offset prior overshooting. Compliance with compensation requirements has been mixed.
Iraqi Refining and Domestic Market
Iraq has substantial but underdeveloped refining capacity. Major facilities at Baiji (heavily damaged during the 2014-2017 ISIS conflict), Daura (near Baghdad), and Basrah collectively provide refining capacity well below domestic consumption needs. Iraq is therefore a net importer of refined products despite being one of the world's largest crude exporters — a structural inefficiency that successive Iraqi governments have prioritized addressing.
Refining expansion projects have been announced repeatedly but have faced chronic delays from financing, security, and political obstacles. The structural product import dependence is unlikely to be resolved on near-term horizons.
What Drives Iraqi Oil Output
OPEC+ quota requirements. Stated quotas frame production targets, though compliance is variable.
Field capacity expansion. Continued investment in southern fields by IOC operators supports gradual growth.
Kurdistan pipeline status. Restart of the Iraq-Turkey Pipeline would add ~450,000 barrels per day of northern exports.
Security situation. Iraq has been substantially more stable since the 2017 defeat of ISIS, but periodic infrastructure attacks remain a risk.
Government budget pressures. Strong fiscal needs incentivize maximum production.
Domestic refining demand. Modest impact relative to export volumes.
Iraq Oil in One Sentence
Iraq is OPEC's second-largest producer — a country whose substantial Basrah-area capacity is operated by international service-contract IOCs and marketed through SOMO, whose northern exports have been chronically disrupted by federal-Kurdish disputes, and whose OPEC+ quota compliance has been among the most variable of any major producer.