Iraq holds more than 112 billion barrels of oil, the world's 2nd largest proven oil reserves after Saudi Arabia. Iraq also has 110 trillion cubic feet of natural gas. The US Energy Information Administration estimates that 90% of the country remains unexplored. These regions could hold an additional 100 billion barrels of oil by a conservative estimate. A study by the Center for Global Energy Studies and Petrology & Associates came up with an estimate of 300 billion barrels, a figure which would give Iraq reserves bigger than those of Saudi Arabia. If these estimates turn out to be true it would mean that Iraq has roughly a quarter of all the world's oil. This means that America's energy security could increase dramatically if Iraq increased oil production to rival that of Saudi Arabia.
After the failed 1990 invasion of Kuwait, Iraq's oil production fell from about 3.5 mbpd to around only 300,000 bpd. Production had recovered to about 2.5 mbpd at the time of the 2nd US invasion of Iraq at the beginning of 2003. Oil production once again fell after the invasion but has picked up of late and is now at 2.4 mbpd, the highest level since the US led invasion. The increase in production is largely due to the improved security scenario in the country. Production is expected to cross the pre-war level by the end of the year. The Iraqi oil minister Hussain al-Shahristani expects production to reach 6 mbpd within the next 4 years.
The Iraqi oil industry has been badly affected by two invasions and almost a decade of sanctions. It needs Western technology for modernization and also fresh investment. Several Western oil companies have shown interest in Iraq, as have others like the Russians, Chinese and the Indians.The Iraqi government is presently working on a legal frame work for foreign investment in the oil industry. Another problem the Iraqi's must solve is how to divide the oil wealth between the different ethnic and religious groups that make up Iraq. The known oil is located mainly in the Kurdish north and the Shiite south of the country. The Sunni dominated areas do not have much oil as of now.
In the run up to the US Presidential elections in November this year, all the candidates are offering hope for an early withdrawal of troops from Iraq, but no definite time-table has been given so far.Even if US forces are scaled back significantly, security duties in Iraq could always be handed over to private contractors like Blackwater, which would amount to a de-facto US occupation of the country.