The fact that Chevron is heading back to Iraq may lead to a win-win attitude that benefits both sides.

Last week’s headline about Chevron potentially taking on new upstream exploration and development work in Iraq was an eye-opener. It has been a long time — a decade — since we have seen the major Western international oil companies (IOCs) actually increasing their commitments in Iraq. Since then, the standard assumption has been that Chinese and Russian firms would take on much of the development work and that Iraq, while still in the top five oil producers globally, would fail to achieve the potential market share it could achieve, given its reserve base.

When the US invaded Iraq in 2003, the case for Western companies to invest there was strong. The prevailing zeitgeist in the world oil market was increasing scarcity and generally rising prices. The Western IOCs were incentivized to scour the ends of the earth for resources and to do business in countries in which security and political risks were substantial.

It ended up taking six years after the invasion for the new Iraqi state to enact a legal framework for these projects, which differed greatly from the production sharing contracts (PSCs) the industry would have preferred. The “technical services contracts” offered were less lucrative, but still allowed the foreign companies to achieve substantially enhanced returns if they succeeded in surpassing their agreed production targets. A slew of contracts were awarded, the largest being for enhancement and production capacity additions at existing fields. There was also some hope in the industry that the more lucrative PSCs could........

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