Volatile oil prices are forcing Iraq to explore alternative revenue streams

OPEC’s second-biggest oil producer, Iraq, is looking at alternative revenue streams as volatility in international crude prices makes its budget revenue unpredictable.

Iraq’s parliament’s finance committee said Monday it aims to boost non-oil revenue to make government revenue more reliable and predictable.

More than 90 percent of Iraq’s government revenue comes from oil, making one of OPEC’s biggest producers vulnerable to any drop in oil prices.

“Iraq relies heavily on oil to increase its revenue, as it is the main 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 parliament’s finance committee, told Shafaq news agency on Monday.

“As members of the Finance Committee, we are not reassured by the volatility of oil prices. We are working to strengthen the collection of non-oil revenues to support the Iraqi budget,” the politician added.

In the short term, Iraq’s oil revenues could fall as the country cuts crude exports in an effort to increase compliance with OPEC+ cuts.

Iraq has been overproducing above its OPEC+ quota for months and has pledged to offset the excess production.

Iraq’s crude exports were cut to about 3.3 million barrels per day (bpd) in August as a boost to the country’s compliance with OPEC+ supply curbs. That was down from 3.48 million barrels per day in July and 3.41 million barrels per day in June.

Iraq, which is OPEC’s second-largest producer, is a regular latecomer to the cartel’s output control agreements because of its overwhelming reliance on oil revenue as a source of state funding.

In an attempt to encourage them, earlier this year the government in Baghdad changed its oil and gas investment regime from technical service contracts to profit-sharing agreements in an attempt to attract more fresh investment to its energy sector.

By Charles Kennedy for Oilprice.com

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