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An uncertain future for fossil fuels and long-standing political turmoil have not deterred Iraq from declaring lofty ambitions to nearly double its crude output capacity to 8 million b/d by 2027.

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But the cash-strapped country would require unprecedented levels of outside investment at a time when many international oil companies, already unimpressed with the fiscal terms Iraq has offered for years, are seeking to de-risk their portfolios.

Iraq would need funds not only to boost drilling, but also to massively expand its surface production facilities and export infrastructure, and drastically reduce the vast associated gas flaring that has made it one of the most polluting oil producing countries.

In the north, the Kurdistan Regional Government's chronic cash flow shortages and budget disputes with the federal government in Baghdad remain major obstacles to growing its oil sector.

It adds up to significant doubt over the likelihood Iraq can hit its declared production target.

"I do not think the 8 million b/d is technically real or achievable," said Hussain al-Chalabi, a London-based Iraqi oil consultant who in 2020 was nominated to become the country's oil minister before the fledgling government of Prime Minister-designate Mohammed Allawi collapsed.

By now, Iraq was supposed to be pumping more than 9 million b/d, according to its National Energy Strategic Plan adopted in 2013, which would have put it in the same league as oil giants the US, Russia and fellow OPEC member Saudi Arabia.

But years of insurgency by the Islamic State ravaged its economy and destabilized its political system. Then the coronavirus pandemic crashed oil prices, prompting OPEC and its allies to institute historic production cuts in 2020, which have been gradually unwound.

Iraqi crude production, including from the semiautonomous Kurdish region, was 4.17 million b/d in October, according to the latest S&P Global Platts survey of OPEC output.

Platts Analytics projects that Iraq's crude production capacity, not including condensate and NGLs, will reach just 4.72 million b/d in 2027, and eventually rise to 5.74 million b/d by 2040 solid growth, but nowhere near the 8 million b/d target announced by oil minister Ihsan Ismaael in October.

Some Iraqi analysts told Platts they believe the country could achieve 6 million b/d by 2027, but that would be highly dependent on prevailing policies, OPEC+ quotas and other potential constraints.

The ministry has recently signed several deals to boost output, notably a $27 billion contract with TotalEnergies that includes raising production at the Ratawi oil field from 85,000 b/d to 210,000 b/d by 2027.

Iraq also has ongoing drilling contracts at its Rumaila, Majnoon, Dhi-Qar and Zubair oil fields, and just inked another agreement for 96 new wells at West Qurna-1. Ismaael said Nov. 19 that West Qurna-2, operated by Lukoil, would reach peak production of 800,000 b/d by 2027, doubling its current output.

Lukoil has also submitted a preliminary development proposal for the Eridu field, which may yield 250,000 b/d at peak.

New surface production facilities are being built in Majnoon and Zubair, but no other similar projects are in the works for other fields. However, at Rumaila, existing infrastructure would allow the field to produce 150,000 b/d more than its current capacity of 1.45 million b/d.

To raise substantial new investment, Iraq would need to markedly improve its fiscal terms, observers say. The ministry has typically relied on technical service contracts with foreign operators, such as ExxonMobil, BP and Shell.

But IOCs largely prefer production sharing contracts that would allow them to count reserves on their balance sheets and boost their valuations. Despite holding some of the cheapest reserves to develop, Iraq has generated lukewarm interest in its most recent bidding rounds over the past decade.

Already, Iraq has seen Shell exit its investment in Majnoon, while ExxonMobil has filed for arbitration to sell off its share in West Qurna-1 against the wishes of the oil ministry, and BP spun off its Rumaila operations into a new subsidiary under its energy transition strategy. Lukoil also sought to offload its West Qurna-2 stake before withdrawing its request in July.

Beyond the fiscal terms, many western oil companies are facing regulatory and shareholder pressure to green their holdings.

"IOCs are less attracted to new investment in their oil sector, and they are trying to abide by sustainable development goals and restructuring their portfolios," Chalabi said.

A major environmental concern is gas flaring. Iraq burned 17.37 Bcm of associated gas in 2020, the second highest globally behind Russia, according to the World Bank.

Iraq is planning to spend $3 billion annually to eliminate flaring by 2025, but increasing crude production to 8 million b/d would substantially increase volumes of associated gas, requiring more investment in capture and treatment plants that could eat into profits from higher crude sales.

In the Kurdish region, the KRG, fiscally overspent after being on the front lines of the battle against the IS, has frequently fallen behind in payments to IOCs, and the budget struggles have reduced the attractiveness of oil development, analysts say.

KRG-controlled production has been about 470,000 b/d in recent months, according to Platts estimates, down from a peak of roughly 600,000 to 650,000 b/d in 2017 before a political row between Erbil and Baghdad led to the federal government's seizure of the Avanah Dome and Bai Hassan field.

Shwan Zulal, a London-based consultant specializing in the Kurdistan region, said the risky investment climate there makes the prospects of rapidly raising crude production difficult.

"You have to attract people to invest," he said. "There are proven reserves. The capacity is there. It's possible, but the politics of producing more oil are difficult."

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Ever ambitious Iraq faces uphill struggle to reach new oil production target - S&P Global