TUESDAY 4 MAR 2014 10:40 AM

COMMS TROUBLES CONTINUE TO PLAGUE IRAQI ECONOMY

As if Iraq didn’t have enough challenges as violence creeps back in to once-moderately peaceful regions. As if BP hadn’t faced enough obstacles from MENA-region countries in its day-to-day operations. As if the irony that surrounds economic and political change in Iraq wasn't as pervasive. In spite of all that, BP, which owns the most highly-saturated oil field in Iraq, has been forced to refrain from developing the site due to bureaucratic red tape.

The port of Basra has seen heavy investment for the past few years in part in anticipation of drilling beginning at the BP-controlled Rumaila field. BP’s inability to secure construction permits from the Iraq government puts the company, and the country, in a difficult position in the region.

Frances Nobes, global risk analyst at London-based risk and crisis consultancy red24, says, "The Rumaila oil field in southern Iraq has long been the backbone of Iraq's oil industry, but recent events highlight the inhibiting effect excessive bureaucracy could have on the productivity and economic development of the country. Businesses of all sizes may be discouraged from engaging in operations here if the process of conducting business is not made consistent, quicker and simplified. This lack of investment could curb economic development within Iraq."

For one, BP has worked in conflict-ridden zones in the past, often ensuring that despite crises, it communicates to its stakeholders the benefits or challenges of operating in that location. With holdups from Basra to Kirkuk, it may be difficult to continue to do so with the support of its stakeholders. Additionally, Iraq has heralded itself since the end of the war as the prodigal son of oil-producing states. It has banked much of its economic growth, infrastructure development and foreign investment on just that. This snag at the Rumaila field could signal to other companies that Iraq is more trouble than it is worth, not a promising step for a country attempting to redefine its nation's brand.

BP’s stake in the Rumaila oil field in southern Iraq is shared with CNPC, China’s state oil company, and Iraq’s Southern Oil Company. BP’s foothold in the Iraqi oil market – expected to become one of the most prolific in the world – extends from Basra at Rumaila to Kirkuk, where BP is currently battling the Kirkuk regional government for development rights.