By Jason Simpkins

Global oil majors interested in Iraq’s huge energy reserves continue to be derailed by that Middle Eastern nation’s political and ethnic divisions - despite recent increases in security.

So far, China has been the most successful at sidestepping Iraq’s blurry bureaucracy. And that presents an intriguing potential view of the future: Should the war-torn nation’s political web ever become untangled, the world’s second-largest oil consumer (China) could end up being the premier player in one of the world’s largest oil-producing nations.

Iraq has the world’s third-largest proven petroleum reserves, according to the Energy Information Administration (EIA). But while the country boasts proven petroleum reserves of 112 billion barrels, the EIA estimates that up to 90% of the country remains unexplored. Only 2,000 wells have been drilled in Iraq, versus approximately 1 million in the state of Texas alone. Iraq would easily have another 100 billion barrels of oil buried beneath its uncharted territories.

For more than a year now, major oil companies have been bidding on exploration-and-development projects in the nation’s fledgling oil sector.  But political rifts and ethnic divides have hampered any real progress in developing the country’s resources.

“Politics - international, domestic, ethnic and party-based - has dominated every aspect of discussions of Iraq’s post-invasion oil development,” the Middle East Economic Survey (MEES) said in its weekly newsletter.

“Given the size of the potential revenues at stake this was probably inevitable,” the survey stated. “But in the end the oil development itself and by extension that of Iraq’s economy, will probably suffer.”

Developing the energy sector is crucial to Iraq’s economy, as crude oil export revenue represents about 60% of Iraq’s gross domestic product (GDP) and 89% of government revenue, according to the International Monetary Fund (IMF).

Unfortunately, the country has been locked in a political stalemate that pits Iraq’s parliament against Iraq’s prime minister, Nouri al Maliki.