The value of active energy projects in Iraq has risen by 48 per cent over 12 months as Islamic State in Iraq and Syria (Isis) has lost ground in the country, according to data provided by project tracking service MEED Projects.

The total value of all active oil, gas and chemical projects in the country stood at $109bn on 19 September 2017 up 48 per cent from a low of $73.6 on 20 September 2016.

Active projects include all projects that have been announced and are either in a pre-execution phase or under execution.

Iraq’s energy project rebound comes after a precipitous decline in project activity after Isis swept across the region in 2014 – taking control of one third of the country including the second city of Mosul.

After Isis initially attacked Mosul the value of oil, gas and chemical projects declined by 61 per cent over two years – falling from $190.0bn in June 2014.

The biggest jump in project activity was between 20 September 2016 and 20 January 2017, when the value of active projects peaked at $124.2bn.

Iraqi forces started the operation to push Isis out of Iraq in October 2016 and declared victory in the battle to take Mosul on 17 July.

Oil projects are solely responsible for the rebound in energy sector project activity and the total value of active oil projects far outweighs the value of gas and petrochemical projects – both of which have failed to see any kind of recovery since Isis took control of Mosul.

Currently 81 per cent of all the current active projects are oil projects, 19 per cent are gas projects.

The value of gas projects has declined slightly over the last 12 months – falling from $24bn to $20.3bn.

According to MEED Projects the total value of active petrochemical projects has fallen to virtually zero over the last four years. This is down from $11.1bn when Isis first attacked Mosul in June 2014.

Looking at the regional distribution of active oil and gas projects the vast majority are in the south of the country.

The southern provinces of Basra, Dhi Qar and Maysan account for $73.6bn of the country’s $109.0bn active projects.

The northern Kurdistan region and Kirkuk only account for $9.3bn in active projects.

Despite significant progress in the fight against Isis over the last 12 months many oil companies remain hesitant about expanding operations in Iraq.

Since the Iraqi army regained control of Mosul the security situation remains difficult across the north of Iraq where Isis has resorted to guerrilla-style attacks on military and civilian targets.

There is also ongoing political uncertainty in Iraq. The many ethnicities that live in the north of the country were broadly unified by the fight against Isis over the last three years.

Now that Isis has lost control of the majority of its territories in Iraq groups like the Turkmen, Kurds and Yazidis could well question their relationships to each other.

The upcoming referendum on Kurdish independence, due to take place on 25 September, could well prove to be a possible catalyst for increased political violence.

However, if the referendum passes without prompting any violent and politically destabilising incidents it is possible that energy companies will be reassured and increase investment in the region.

Ahead of the referendum, authorities in Kurdistan have done their best to improve the business climate for oil companies operating in the region – announcing a flurry of deals in the weeks leading up to the vote.

Amongst the deals announced were statements released on 24 August by Norway’s DNO and UK-listed Genel Energy. In the statements the companies said they had reached agreements with the Kurdish authorities that would clear outstanding debt and restructure oil export payments.

More recently, on 18 September Rosneft and the Kurdistan Regional Government (KRG) announced that the Russian oil major would invest in gas pipelines in the autonomous region.

Though the Kurdistan authorities have done their best to encourage further investment in oil projects in the region – some major disappointments have made companies wary of taking risks in the region.

In March, UK-listed Genel Energy announced that it was slashing its reserve estimates for its Taq Taq field by 66 per cent. It was the second time that Genel had downgraded the estimate and saw the company’s share price collapse by more than 20 per cent.

Also, this month MEED revealed that the Norwegian oil and gas operator DNO has cancelled a planned expansion project at the Tawke oil field in Iraq as the company had downgraded the estimate for future production from the field.

While Isis is less of a threat in the south of the country – increased spending on the war in the north and reduced revenues due to low oil prices has left less funds free for spending on public infrastructure and security in the south.

This has led to security problems as well as problems like water shortages and electricity black outs that have sparked civil unrest in some areas.

Some companies have also run into problems when it comes to making deals with Baghdad regarding budgets and investment.

One sign that the business environment for major oil companies in the south remains difficult is Shell’s announcement earlier this month that it is exiting Iraq’s Majnoon oil field, which is located in the Basra Governorate.

The announcement came after it failed to find agreement with the government on plans to increase output from the field from the current level of 220,000 barrels a day.

Continuing to reduce the influence of Isis as well as improving the business climate for oil companies is likely to be key to encourage increased outside investment in Iraq’s oil and gas sector going forward.

If there is no improvement in security and the business climate project activity could well decline as the initial optimism over the victories against Isis wears off.