A high-risk operational environment coupled with a difficult bureaucracy and market conditions means Iraq is underperforming in oil, Wood Mackenzie found.

Iraq is one of the largest producers in the Organization of Petroleum Exporting Countries and agreed to limit it output to 4.35 million barrels per day for the first half of the year under the terms of a multilateral agreement to curb production to balance an oversupplied market.

As the post-U.S. invasion dust settled, Iraq late in the last decade opened its doors to international investors and set its sights on producing as much as 12 million bpd. A report published Wednesday from analytical group Wood Mackenzie said Iraq is a low-cost producer that hosts some of the most capable energy countries in the world, but there are several factors that are getting in the way of production objectives.

Ian Thom, the principal analyst for exploration and production in the Middle East and North African market, said that, the OPEC agreement notwithstanding, Iraq is still far away from it goalpost.

"Harsh technical service contract terms, and a myriad of technical, political and security factors have all conspired to subdue growth," he said in an emailed report.

Iraqi oil exports from the southern ports peaked in December, one month before the implementation of the OPEC production agreement. Iraqi Oil Minister Jabbar al-Luaibi said during an early 2017 visit to the Basra port that rehabilitation operations for the infrastructure there were progressing in the right direction for Iraq. According to him, the overhauls would allow for an "unprecedented increase of oil production."

Iraq reported to OPEC economists in April that production was generally in line with its commitments, but still about 1 million bpd more than in 2015. Crude oil prices started to collapse in 2016 and, according to Wood Mackenzie, weak market conditions have led to late payments to energy companies working in Iraq and capital commitments are lower as a result.

Meanwhile, the steady drone of terrorism from the group calling itself the Islamic State makes Iraq one of the riskiest countries in which to do business.

"Indirectly, the cost of fighting IS militants has been a major reason why the government has struggled to meet scheduled oil payments and has called for investment to be slowed down," Wood Mackenzie's report read.

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