Veteran oilman Ihsan Ismaael, the head of Basra Oil Company (BOC) and a household name in Iraq’s energy sector, has been voted in as oil minister in the government of newly appointed Prime Minister Mustafa al Kadhimi.

Iraq's parliament also gave its vote of confidence to six other ministers, including the key oil and foreign affairs posts, completing Kadhimi’s 22-member line-up.

Ismaael takes over from Finance Minister Ali Allawi who had been serving as acting oil minister in addition to his main role as deputy prime minister for economics and energy, overseeing the oil ministry.

Key Opec position

Ismaael's stewardship of the oil sector of Opec’s second largest producer is bound to please international oil companies operating the supergiant fields of the Basra region that account for the lion’s share of the country’s crude production.

He is well respected for his thorough knowledge of the oil sector as well as the needs of the supermajors, which have poured billions of dollars into the country in the past decade to consolidate Iraq’s position as the second-most important Opec producer after Saudi Arabia.

Ismaael’s influence grew under former oil minister Thamer al Ghadhban who had also served in the US military-appointed provisional government following the overthrow of long-time dictator Saddam Hussein.

He often accompanied Ghadhban to regular Opec meetings in Vienna.

Challenges ahead

Ismaael faces, however, a number of key challenges, chief among them improving the country’s image as a laggard within Opec for not fully respecting its assigned quotas.

Iraq has been singled out for criticism for not fully respecting the 12 April production reduction pact agreed by the Opec+ alliance as part of plans to prop up prices in the wake of the Covid-19 pandemic.

Iraq has now pledged to mend its ways and compensate for its recent overproduction.

The new oil minister also needs to convince international companies to reduce their share of production to comply with Opec restrictions. The supermajors would grudge against any deep cuts that would further reduce the appeal of their investments as they have often complained about tough fiscal terms under their existing service contracts with state-owned BOC

Furthermore, Ismaael would have the unpleasant task of trying to resolve a long-standing dispute with the autonomous Kurdistan Region of Iraq over oil revenue sharing, production and exports.

Just before he was voted in, the Oil Ministry in Baghdad pledged to shoulder its share of the output cuts under the Opec+ deal, which decided on Saturday to extend the record cuts.

Adherence promises

"Despite the economic and financial conditions facing Iraq, it is sticking to adherence to the agreement, because it believes in the necessity of solidarity of all producers ... to save the oil market," Oil Ministry spokesman Assem Jihad said.

It remains to be seen how much leeway Ismaael will be given by Kadhimi in running the energy sector. Kadhimi's appointment in May as prime minister came after months of political turmoil and unrest in nationwide protests over widespread corruption, economic mismanagement and lack of jobs.

"My cabinet is now complete. This is vital in implementing our programme and delivering on our commitments to our people, who are waiting for actions, not words," Kadhimi said in a tweet on Saturday.

Poor economic state

Low oil revenues have exacerbated the economic misery in Iraq, which relies on crude sales to fund more than 90% of its budget. Ismaael will, therefore, have to play a careful balancing act between providing for the financial needs of the country and safeguarding its ties with Opec.

Iraq said on Sunday it pumped 4.2 million barrel per day in May, well above its Opec+ quota of 3.6 million bpd.

Exports were at 3.6 million bpd, Iraq's state-owned marketing company SOMO said. The output and export figures include contributions from the Kurdistan region.

Under the Saturday Opec+ alliance deal, Iraq and other producers which have failed to fully comply with their quotas promised to compensate by implementing deeper cuts for July, August and September.

Finance

Industry veteran voted in as Opec heavyweight Iraq's new oil minister