Iraq's ExxonMobil Deal: What 2.5 Million Barrels of Seawater Mean for Oil Output

Iraq's state-owned Basra Oil Company (BOC) has signed a memorandum of understanding (MoU) with US energy major ExxonMobil for the second phase of a vital seawater utilisation project. This initiative aims to supply up to 2.5 million barrels per day (bpd) of water to Iraq's southern oilfields (Shafaq). For you, this agreement is a significant development, directly impacting Iraq's ability to maintain and increase its oil production, which is the bedrock of its economy and a key factor in regional energy stability.

Why Iraq Needs Seawater for Oil

Iraq's economy is heavily dependent on oil, with crude exports accounting for over 90% of government revenue (Iranintl). To sustain and increase production from its vast southern oilfields, Iraq faces a technical challenge: maintaining reservoir pressure. As oil is extracted, the pressure within the underground reservoirs can drop, making it harder to bring more crude to the surface.

Seawater injection is a standard industry method used to manage this pressure. By injecting large volumes of water, operators can push the remaining oil towards production wells, thereby extending the life of the field and boosting recovery rates. Iraqi Oil Minister Bassem Mohammed Khudair Al-Abadi emphasised that the water would "help sustain production and support later increases in output" (Shafaq).

This isn't ExxonMobil's first involvement in such an initiative. The company held discussions with Iraq on the Common Seawater Supply Project (CSWIP) back in 2018, though those talks stalled over contract terms and costs (Spglobal). ExxonMobil later divested its stake in the West Qurna I oil field in 2023. However, the company has been planning a return, signing a Heads of Agreement in October 2025 to develop other upstream assets (Spglobal). This new MoU signals a significant re-engagement.

This project will complement another major seawater development being carried out by the French company TotalEnergies, which has a capacity of 5 million bpd (Shafaq). The broader Iraq Common Seawater Supply Project (CSSP) officially began in early 2026, led by China Petroleum Pipeline Engineering Co., Ltd. (CPP). This extensive project, which involves a 949-kilometre pipeline network, is slated for completion over 54 months (Iploca).

What This Means for Iraq's Production and Economy

This agreement is part of the Iraqi government's broader strategy to attract international energy companies and bring in advanced technology (Shafaq). The minister described it as reflecting a "favourable investment environment for major projects in Iraq's energy sector" (Shafaq). This perception of a stable investment climate is crucial for attracting the capital needed to develop Iraq's oil resources.

Iraq is the largest crude oil producer within OPEC and holds the world's fourth-largest proven crude oil reserves. The country aims to increase its oil export capacity to 5 million bpd (Shafaq) and has an ambitious target of reaching 7 million bpd by 2030 (Iraqoilreport). Recent production figures show Iraq's output rising, with crude oil production increasing to 4.399 million bpd in September 2026 from 3.746 million bpd in August and 2.715 million bpd in July (Tradingeconomics). This contrasts sharply with a significant drop in March 2026, when southern oil production fell by about 70% to roughly 1.3 million bpd due to export difficulties (Iraqoilreport).

For public finances, increased oil production directly translates into higher government revenues. These funds are vital for financing public sector salaries, subsidies, infrastructure projects, and security expenditures. Iraq's draft budget for 2027, for example, proposes an oil price assumption of $58 per barrel and projects a substantial budget deficit exceeding 40 trillion Iraqi dinars ($166 billion) (Kurdistan24). Sustained oil output is essential to manage such fiscal challenges.

For businesses and investors, ExxonMobil's renewed engagement highlights Baghdad's progress in developing its oilfields and could enhance perceptions of security, potentially drawing in more capital (Iranintl). The Oil Ministry maintains MoUs with several US companies, including Chevron and ExxonMobil, seeking to benefit from their advanced technologies and expertise (Shafaq). For Iraqi households, the implementation of such large-scale projects is expected to generate local employment opportunities and stimulate service-related industries, addressing high unemployment, especially among young people (Kurdistan24). Furthermore, this project supports Iraq's efforts to achieve greater energy independence, potentially reducing its reliance on energy imports from neighbouring countries (Iranintl).

What to Watch Next

As the MoU moves towards full implementation, several key indicators will be important for you to monitor:

• Project Progress: Keep an eye on the development and construction phases of both ExxonMobil's and the broader CSSP project. The CPP-led CSSP has a total duration of 54 months, including 42 months for construction (Iploca).
• Oil Production Levels: Watch for updates on Iraq's crude oil production, particularly from the southern fields, which the oil ministry anticipated would surpass 3 million bpd within one to two months from June 2026 (Iraqoilreport).
• Global Oil Prices: Fluctuations in international oil prices will continue to have a direct impact on Iraq's government revenues and economic stability.
• Infrastructure Development: Progress on critical infrastructure projects, such as strategic pipelines to Fishkhabour and Baniyas, and new export terminals, will be crucial for Iraq to meet its ambitious export capacity goals (Shafaq). You can track Iraq's overall oil output trends here: Iraq's Oil Output Hits 2026 High: What It Means for its Economy.

The bottom line

Iraq's agreement with ExxonMobil for a 2.5 million bpd seawater supply project is a critical step towards securing its long-term oil production goals. By maintaining reservoir pressure in its southern fields, Iraq aims to stabilise its economy, attract further international investment, and create jobs. This initiative underscores the country's strategic commitment to leveraging its vast oil reserves for national development.

This article is for information only and is not financial advice.