Oil exploration and production in Iraq began in the 1920s under the terms of a wide-ranging concession granted to a consortium of international oil companies known as the Turkish Petroleum Company and later as the Iraq Petroleum Company. The nationalization of Iraq's oil resources and production was complete by 1975. From 1975 to 2003, Iraq's oil production and export facilities were entirely state operated. However, from the early 1980s until the toppling of Saddam Hussein's government in 2003, the country's hydrocarbon infrastructure suffered from the negative effects of war, international sanctions, a lack of investment and technology, and, in some cases, mismanagement and corruption. Iraq's highest-ever production level of 3.5 million barrels per day (mbd) was reached in 1990 immediately prior to the Iraqi invasion of Kuwait. Damage during the 1991 Gulf War and subsequent international sanctions limited overall production and exports until 2003 and beyond. According to the Oil and Gas Journal , Iraq has 115 billion barrels of proven oil reserves, the world's third-largest after Saudi Arabia and Iran. Other estimates of Iraq's potential oil reserves vary, and the U.S. Department of Energy's Energy Information Administration (EIA) notes that current estimates "have not been revised since 2001 and are largely based on 2-D [two-dimensional] seismic data from nearly three decades ago." Given the relative abundance of oil resources in Iraq and the relative ease with which Iraqi oil is extracted, many observers expect that new exploration using advanced technology will reveal further reserves, although estimates of potential additional reserves vary considerably. Many oil industry professionals consider Iraq to have the world's largest, potentially most productive reserves that are not yet fully developed. Iraq's current proven reserves are concentrated (65% or more) in southern Iraq, particularly in the southernmost governorate of Al Basrah. Large proven oil resources also are located in the northern governorate of Al Tamim near the disputed city of Kirkuk. (See Figure 1 , below.) Iraq's current average oil production rate fluctuates around the March 2003 level of 2.5 mbd. However, the current export level of 1.97 mbd remains below the March 2003 level and the 2010 budget target of 2.10 mbd (see Table 1 , below). At present, crude oil is the source of over 90% of Iraq's domestic energy consumption, and, according to the International Monetary Fund (IMF), oil exports generate approximately 85% of Iraq's government revenue. Declines in global oil prices from their 2008 high and reduced oil production led Iraqi leaders to amend their 2009 and 2010 revenue and budget assumptions from projected surpluses to projected consecutive $15 billion deficits. The IMF expects Iraq's budget "to record significant, albeit declining deficits" in 2010 and 2011, "before returning to a surplus position in 2012." Official U.S. assessments stress that continued fluctuations in oil prices and production may jeopardize Iraq's fiscal stability and the sustainability of its reconstruction and development plans, with uncertain follow-on effects on the economy and security. Compared to other top oil producers, Iraq's current total output makes a significant contribution to global oil supplies. According to the U.S. Energy Information Administration (EIA), as of October 2009, Iraq's total production of 2.4 mbd accounted for nearly 3% of global supply and made Iraq the world's 11 th -largest oil producer (see Table 2 , below). Current Iraqi plans call for the expansion of oil production to 4 mbd by 2013 and then upward to 6 mbd by 2017. In December 2009, Iraq's Minister of Oil Hussein Shahristani stated that "any increase will not be seen before 2011." International firms are not expected to begin to make investments and carry out substantial infrastructure work under the terms of recently agreed technical service contracts until after the Iraqi elections scheduled for March 2010. U.S. officials and many observers greeted Iraq's 2009 technical service contract bidding rounds (see below) as a signal that the Iraqi political leadership is committed to capitalizing on Iraq's resource potential and generating revenue to meet the country's significant development needs. The International Monetary Fund, World Bank, and others have argued that the fiscal shortfalls Iraq is facing as a result of stable oil production levels and moderate global oil prices will jeopardize the government's ability to provide needed services and could undermine security gains. Nevertheless, the political, security, and technical challenges described above leave most experts skeptical that Iraq will be able to meet its ambitious goals within the time frame currently outlined by the Maliki government. In support of ambitious oil production expansion goals, Iraqi officials are conducting an international bidding and contracting process for oil field services and have renegotiated some Saddam-era oil production agreements. Iraq's government held two technical service contract bidding rounds in June and December 2009. Following the first tender in June, international firms sought per barrel fees far above what Iraq was willing to pay, and several potentially valuable service contracts for major fields were not awarded. Subsequent negotiations between Iraq and prospective foreign partners yielded more compatible fee offers from the international oil companies (IOCs), and several first round field contracts were initialed in late 2009. The second bidding round in December 2009 resulted in more closely aligned Iraqi offers and foreign bids, with many IOCs submitting highly competitive bids and proposing higher production volume pledges than Iraqi officials expected. Since December 2009, contract negotiations have proceeded rapidly. However, according to the U.S. Special Inspector General for Iraq Reconstruction (SIGIR), "to succeed, the winning bidders must overcome Iraq's aging infrastructure, rampant corruption, and fragile security." Under the terms of the new technical service contracts signed by the Ministry of Oil since mid-2009, IOCs will work in joint venture partnerships with Iraq's state-owned oil firms to manage and improve the production of specific oil fields, including many of Iraq's largest. Iraq will compensate IOCs based on an agreed per barrel fee subject to contract conditions, such as the attainment and maintenance of targeted production levels for defined lengths of time. Once contracts are initialed by the Ministry of Oil, they are reviewed by Iraq's cabinet, the Council of Ministers. While the bidding processes have been conducted in a transparent, public manner, final contract details are being released to the public on an ad hoc basis as terms are agreed and approved by Iraqi officials. In all cases, terms may be subject to renegotiation, and clauses reportedly have been included allowing for adjustments required by potential future OPEC quota considerations. Table 3 below provides an overview of recent Iraqi oil service contracts offered and awarded in the June and December 2009 bidding rounds. Iraq also has decided to invest in some fields itself, in the absence of specific foreign interest. In late 2007, the Kurdistan Regional Government (KRG) finalized its own regional oil and gas investment law and signed new production sharing contracts (PSCs) with several international companies, including U.S.-based Hunt Oil. Under the terms of the KRG's model PSC, foreign firms manage oil production in given fields, recovering their costs from the sale of specific percentages of the oil produced. The KRG opposes proposals to require federal approval of its existing or future contracts, but notes that it is committed to revenue sharing as defined in the constitution (see below) and draft revenue-sharing legislation that has been considered to date. In May 2009, the national Ministry of Oil agreed to allow the KRG to export a limited quantity of oil using the national oil pipeline infrastructure from two fields, Tawke and Taq Taq, for which PSCs were signed prior to February 2007. However, a dispute over the compensation of the foreign firms involved in production at those fields has halted exports from KRG-controlled fields and has yet to be resolved (see below). Kurdish officials reportedly hope to expand oil production in the KRG region to 1 mbd by 2014. Small-scale U.S. government efforts continue to encourage development of legal and regulatory frameworks for the oil sector and to offer assistance to improve Iraqi budget execution. However, major U.S. programs to assist in the rehabilitation and security of Iraqi oil infrastructure are reaching completion. According to the most recent report of the SIGIR (issued January 30, 2010), "as of December 31, 2009, the United States had allocated $2.06 billion, obligated $1.93 billion, and expended $1.91 billion … to rehabilitate the oil and gas sector in Iraq." In addition, as of December 2005, the United States had administered over $2.8 billion in Iraqi funds from the DFI for oil infrastructure projects. The SIGIR has reported that Iraq's operational funds for its Oil Ministry increased over 800% from 2008 to 2009 reaching the level of $950 million. Oil sector investment funding for 2009 remained roughly static at $2.2 billion and is scheduled to grow to $2.6 billion in 2010. Observers have noted that significant investments in port, road, rail, water, and power infrastructure also are necessary in order for Iraq to achieve its ambitious oil production expansion targets. The main points of contention among Iraqi politicians and citizen groups with regard to energy policy include the proper roles and authorities of federal and regional bodies, the terms and extent of potential foreign participation in oil and gas production and development, and potential formulas and mechanisms for equitably sharing oil and gas revenue. In addition, some Iraqi labor groups and elected officials have challenged the transparency and inclusiveness of legislative drafting and contract negotiation processes thus far. Concurrent negotiations regarding constitutional amendments have had direct implications for the hydrocarbon legislation debate, particularly efforts to clarify the specific authorities granted to federal and regional governments to regulate oil and gas development and export activities under Articles 111 and 112 of the Iraqi constitution. Overall, Iraqi, U.S., and other international observers have expressed concern that the violence and political tension that have prevailed in Iraq in recent years have not been conducive to careful consideration of detailed hydrocarbon sector legislation or new national oil and natural gas contracts.