The Virgin Oilfields of Iraq; A large part of the country is still mainly unexplored. Of the more than 80 oilfields discovered, only 21 have been developed.

Byline: Leonardo Maugeri, Maugeri is group senior vice president for corporate strategies at Eni, the Italian oil and gas company.

When it comes to oil, Iraq is--believe it or not--largely virgin territory. Though much of the talk about rebuilding Iraqi fields focuses on bringing production back up to prewar levels of about 3 million barrels a day, Iraq is the only Middle Eastern oil power other than Saudi Arabia with huge reserves that are untapped, even unexplored. Indeed, Iraq has the potential to match the 10.5 million barrel-a-day capacity of Saudi Arabia, which is now the only producer capable of using its excess capacity to moderate world oil prices.

The underdevelopment of Iraqi fields stems from their peculiar history. In 1918, British War Secretary Maurice Hankey foresaw that oil would be as important to the next great war as coal was to the first, and that the only big fields within British reach were in Persia and Mesopotamia. That imperative shaped British postwar policy toward Mesopotamia, which led to the carving out of a new oil state under British patronage. While oil dictated the birth of modern Iraq, though, there was no rush to develop the resource. By 1929 jockeying among the great powers led to the creation of the Iraq Petroleum Corp., a Western consortium led by four of the "Seven Sisters" (the world's largest oil corporations): the British predecessors of Shell and BP, the American predecessor of Exxon Mobil, and the future Total of France. Just as they secured control of this prized supply, the Wall Street crash of 1929 scuttled demand. Huge new fields were discovered in the United States, and an unprecedented glut inspired the Seven Sisters to limit global production.

They put the brakes on Iraq. Development stalled, exploration was restrained and Iraq Petroleum acquired all remaining concessions in order to shut out competition. This freeze lasted until the early '50s, when rising demand and the temporary nationalization of Iran's oil convinced Iraq Petroleum to resume development. Yet already, a new stage of overproduction had begun. The Seven Sisters controlled all major Middle East oil concessions and secretly decided to restrain output, but not equally across the region. Politically stronger or more attractive countries--such as Iran, Kuwait or Saudi Arabia--were penalized less than Iraq. By 1960, Iraq Petroleum had developed only eight out of the 35 oilfields discovered in Iraq.

The day of reckoning came in 1961, when the nationalist ...