نوع المستند : Original Article
المؤلف
قسم هندسة النفط، كلية الهندسة، جامعة النور
الكلمات الرئيسية
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https://jnog.alnoor.edu.iq/ |
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An Econometric Study Using the ARDL Model: The Impact of Associated Gas Flaring and its Efficiency on the Non-Oil GDP in Iraq for the Period (2000-2024) |
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Administrative Technical College of Engineering, Alnoor University, Nineveh, 41012, Iraq |
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Article information |
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Abstract |
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Article history: Received 15 May, 2026 Revised 12 June, 2026 Accepted 22 July, 2026
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The study aims to analyze the impact of associated gas exploitation on non-oil GDP in Iraq during the period (2000-2024), with a focus on associated gas flaring and its economic and developmental losses. The study relied on the Distributed lags Autoregression Model (ARDL) to analyze the relationship between non-oil GDP and associated gas flaring, gas and electricity efficiency, and global oil prices. The results of stability and co-integration tests showed that there is a long-term equilibrium relationship between the variables. The results also showed that the continued flaring of associated gas wastes important economic resources and limits the Iraqi economy's ability to diversify, while improving the efficiency of gas exploitation supports the electricity sector, reduces dependence on imports, and boosts non-oil economic activity. The study concluded that it is necessary to expand the projects of collecting and treating associated gas and linking them to the productive sectors in a way that contributes to reducing flaring and achieving sustainable economic and development returns. |
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Keywords: Associated Gas, Gas Flaring, Gas Utilization Efficiency, Non-Oil GDP , Iraq, ARDL Model. |
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Correspondence: |
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DOI: https://doi.org/10.69513/jnog.v2.i2.a3 ©Authors, 2026, College of Engineering, Alnoor University. This is an open-access article under the CC BY 4.0 license (http://creativecommons.org/licenses/by/4.0/). |
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1. Introduction
The oil and gas sector constitutes the backbone of the Iraqi economy, as public revenues and economic activity depend heavily on crude oil production. Although the expansion of oil production over the last two decades has led to a significant increase in associated gas production, a large proportion of this resource continues to be flared rather than utilized economically. Consequently, Iraq has become one of the world's leading gas-flaring countries, resulting in substantial economic losses, inefficient resource utilization, continued dependence on imported energy, and adverse environmental impacts. Associated gas is a strategic resource that can support electricity generation, petrochemical industries, and non-oil economic diversification. Nevertheless, inadequate gas collection and processing infrastructure, together with institutional and technical constraints, have limited its effective utilization. Despite the importance of this issue, empirical evidence concerning the impact of associated gas flaring and gas utilization efficiency on Iraq's non-oil GDP remains limited, particularly within a comprehensive econometric framework. This research gap constitutes the central problem addressed by the present study. Accordingly, this study aims to analyze the impact of associated gas utilization on non-oil GDP in Iraq during the period 2000–2024 by examining the effects of gas flaring, gas utilization efficiency, electricity generation, and international oil prices. The study is based on the hypothesis that continued flaring and inefficient utilization of associated gas negatively affect non-oil GDP, whereas improving gas utilization efficiency contributes positively to non-oil economic activity and economic diversification.
To achieve these objectives, the study adopts a descriptive-analytical and econometric approach. Annual data covering the period 2000–2024 are analyzed using the Autoregressive Distributed Lag (ARDL) model to estimate both the long-run and short-run relationships among the study variables. The findings are expected to provide empirical evidence to support energy policy and promote the efficient utilization of associated gas to strengthen non-oil economic growth in Iraq.
2. Materials and Methods
2.1 Materials
2.1.1 Description of the data and its sources.
The study is based on annual data covering
the period 20002024. The dataset was compiled from official national and international sources, including the Ministry of Oil, the Central Bank of Iraq, the Ministry of Electricity, the World Bank, and the U.S. Energy Information Administration (EIA). Table (1) presents the study variables, their measurement, and data sources.
Table (1). Description, Measurement, and Data Sources of the Study Variables
|
Variable |
Symbol |
Measurement |
Data Source |
|
Non-oil Gross Domestic Product |
NGDP |
Constant prices (billion IQD) |
Central Bank of Iraq |
|
Associated Gas Production |
GP |
Billion cubic meters (BCM) |
Ministry of Oil, Iraq |
|
Gas Flaring |
FG |
Billion cubic meters (BCM) |
World Bank (GGFR) |
|
Gas Utilization Efficiency |
GUE |
Percentage (%) = Utilized Gas / Produced Gas × 100 |
Calculated by the researcher based on Ministry of Oil data |
|
Electricity Generation |
ELEC |
Gigawatt-hours (GWh) |
Ministry of Electricity, Iraq |
|
International Oil Price |
OP |
Brent crude oil (US$/barrel) |
World Bank / EIA |
2.2 Methods
2.2.1 The standard methodology and the model used.
The study relied on the Distributed lags Autoregression (ARDL) model for its suitability in analyzing dynamic relationships between variables under mixed time series of order I(0) and order I(1), in addition to its efficiency in limited samples, and the possibility of deriving both long-term and short-term relationships within a single framework.
The dormancy properties of the variables were tested using the unit root test using the developed Dickiy–Fuller test (ADF) to determine stability, then the test of the existence of a co-integration relationship via the bound test, and after confirming the co-integration, the long-term equation estimation was performed and the error correction model (ECM) was formulated to analyze the speed of adaptation towards equilibrium.
Two standard models were built to compare the impact of different indicators of non-exploitation, and to test the extent to which gas contributes and efficiently interprets Iraq's non-oil GDP.
Model I: Direct Burn Model
This model relies on the associated gas flaring variable (FG) as a direct indicator of gas non-exploitation, and aims to measure the impact of flaring on non-oil GDP, according to the following mathematical formula:
NGDP = β0 + β1 FGt + β2 ELECt + β3 OPt + ξt (1)
Model Two: Efficiency Model
It is based on the EFF variable, which measures the level of gas utilization relative to the quantities burned, and aims to test whether the efficiency of gas management positively affects non-oil GDP. The mathematical formula of the model is as follows:
NGDP = β0 + β1 EFFt + β2 ELECt + β3 OPt + ξt (2)
3. Results and Discussion
3.1 Background and Descriptive Analysis
3.1.1 Theoretical Background
3.1.1.1 Concept and Economic Importance of Associated Gas
Associated gas is a hydrocarbon resource produced alongside crude oil and is classified as a secondary energy source with high economic importance when exploited efficiently. The economic literature suggests that the exploitation of associated gas is an essential element in regulating the added value of energy resources, especially in rentier economies (Sovacool, 2016) (1).
Associated gas is also seen as an important input into the energy sector, as it is used to generate electricity and support industrial activities, promoting non-oil economic growth. In this context, several studies confirm that improved gas exploitation efficiency can enhance economic efficiency, especially in oil-producing developing countries (Bazilian et al., 2014) (2).
In Iraq, associated gas is an underutilized strategic resource, as studies indicate a large gap between actual production and economic use, posing challenges for natural resource management (Al-Maamary et al., 2017) (3).
Studies show that countries that rely heavily on oil exports tend to neglect the exploitation of associated gas, leading to higher flaring rates. In this context, the World Bank (2020) (4) indicates that Iraq is among the largest gas-flaring countries globally, due to the rapid expansion of oil production without parallel development of the gas sector. The associated gas flaring represents a significant economic waste, as it results in the loss of an energy resource that could be exploited to reduce the energy gap, support the electricity sector, and promote non-oil economic growth. Applied studies in Iraq also confirm that the exploitation of associated gas can help reduce the energy gap and alleviate fiscal pressures (Al-Jubouri, 2021) (5).
Studies also indicate that there is a direct relationship between the increase in oil production and the increase in the quantities of associated gas burned, especially after the rounds of oil licenses in Iraq, which has exacerbated the phenomenon of flaring. This helps reduce the energy gap, support the electricity sector, and stimulate non-oil economic growth, underscoring the importance of developing gas collection and processing infrastructure.
The importance of associated gas is highlighted by its versatility: it can be exploited for electricity generation, petrochemical industries, and fertilizer production, and it also helps reduce dependence on energy imports. Applied studies in Iraq indicate that the exploitation of associated gas can help reduce the energy gap and alleviate fiscal pressures (Al-Jubouri, 2021) (5).
3.1.1.2 Associated Gas Flaring and Gas Utilization Efficiency
The flaring of associated gas is one of the most prominent problems facing Iraq's energy sector, as this gas is directly linked to crude oil extraction. Associated gas is natural gas that comes out of oil reservoirs with oil, and may be usable for electricity generation, industry, and petrochemicals if an appropriate collection, processing, and transmission system is available. However, the weakness of this system results in the disposal of a large part of it by burning it in oil flares, turning an important economic resource into a source of waste and pollution. The World Bank reports that flared gas in Iraq represents a significant economic loss, with an estimated annual loss of $2.5 billion, and that the flared gas could support a significant additional electricity-generation capacity if it were exploited rather than burned (World Bank, 2017) (6).
The roots of this phenomenon in Iraq lie in the oily nature of the Iraqi economy and the fact that most of the gas produced is associated rather than free. Thus, increased oil production automatically leads to an increase in the quantities of associated gas, and if collection and processing capacities do not increase at the same pace, flaring becomes the practical result of this expansion. The US Energy Information Administration (EIA) has shown that Iraq was among the highest countries in the world in gas flaring, with the volume of gas burned reaching about 625 billion cubic feet in 2023, mainly related to the inadequacy of pipelines and intermediate infrastructure needed to transport gas from production areas to processing and consumption plants (EIA, 2025) (7).
One of the main causes of associated gas flaring in Iraq is the weak infrastructure of the gas sector, particularly collection networks, pressing stations, processing units, and transmission lines. Many oil fields expand production after oil licensing rounds, while gas facilities have not developed as quickly. This has led to a gap between the quantities of gas produced and those that can be processed, and flared gas volumes have increased, especially in the major southern fields. Basrah Gas Company confirms that it is collecting and processing associated gas from the Rumaila, West Qurna/1 and Zubair fields, and that it captures more than 60% of the associated gas produced from these fields, which shows that the expansion of treatment capacities can reduce flaring when appropriate investments and technical systems are available (Shell Iraq, 2024) (8).
The structure of economic incentives has also contributed to the continuation of the phenomenon, as oil production provides the state with direct and rapid revenue, while the accompanying gas investment requires substantial capital expenditure and long-term projects. Therefore, it has often been prioritized to increase crude oil production rather than build an integrated gas investment system. With weak funding, complex contracts, and long project duration, incineration has become a temporary operational option but has become an ongoing pattern over time. This means the problem is not only technical but also related to how resources are managed and how investments are allocated among oil, gas, and electricity. An important institutional reason is poor coordination between those responsible for oil, gas, and electricity. Associated gas requires an integrated chain that starts with capturing gas in the fields, transporting and processing it, and then directing it to power plants or manufacturing facilities. When there is insufficient coordination between the Ministry of Oil, the Ministry of Electricity, and the processing and transmission companies, the links in this chain are disrupted, and gaps in the supply of gaseous fuel to power plants emerge. As a result, Iraq sometimes resorts to more expensive liquid fuels or to imports of gas and electricity, despite the presence of large quantities of locally burned associated gas (World Bank, 2017) (6).
Environmentally, gas flaring emits large amounts of carbon dioxide, methane and polluting compounds, as well as health and environmental impacts on areas near oil fields. This dimension is important in Iraq because many of the burning sites are located near communities or agricultural areas, making burning not only an energy issue, but also a developmental, environmental, and health issue. Therefore, reducing flaring not only yields economic returns, but also contributes to reducing emissions and improving the quality of the environment in oil-producing regions.
Although the problem persists, Iraq has seen some positive developments, including the establishment of the Basra Gas Company, the expansion of gas collection and processing projects, and other initiatives to convert flared gas into fuel for power plants. However, these efforts remain insufficient to eliminate flaring entirely, as the volume of associated gas produced increases with rising oil production, while processing requires significant and sustained investments. Therefore, the solution is not limited to a single project, but requires an integrated national policy that links oil production, gas investment, and the development of the electricity sector.
Accordingly, it can be argued that the associated gas flaring in Iraq results from a combination of factors: rapid oil expansion, weak gas infrastructure, inadequate institutional coordination, high processing project costs, and delays in connecting gas to the electricity sector and manufacturing industries. Addressing this phenomenon requires converting associated gas from a neglected by-product into a strategic economic resource, in line with the goal of diversifying the economy and reducing dependence on crude oil.
3.1.2 Economic Analysis
3.1.2.1 Associated gas production, flaring in Iraq (2000-2024).
Table 2 shows the evolution of associated gas production (GP), flared gas (FG) quantities, and flaring rates, as well as the estimated economic losses in Iraq during the period (2000-2024). The data indicate a clear increase in the quantities of gas produced and burned alongside the expansion of crude oil production, especially after the oil licensing rounds. The table also reflects the continued high incineration rates despite the relative improvement in treatment capacities in recent years. It can be seen from Table (2) that the production of associated gas increased from about 3.5 billion cubic meters in 2000 to more than 11 billion cubic meters in 2024, which reflects the significant expansion of crude oil production during the study period. On the other hand, the quantities of flared gas increased from 2.8 billion cubic meters to about 8.9 billion cubic meters during the same period, indicating that a large part of the increase in production was not offset by a parallel expansion of collection and processing capabilities.
The data also show that burn rates remained relatively high throughout the study period, ranging from 76% to 81% in most years, indicating continued reliance on incineration to dispose of excess gas. Although there has been a relative improvement since 2021 due to the expansion of gas processing projects, the percentage remains high by international standards. The results also reflect a clear gap between oil expansion and limited development in the gas sector's infrastructure, which requires increased investments in gas collection and processing projects and linking it to power plants and manufacturing industries. Source: Prepared by the researcher based on the study data, reports of the World Bank, the GGFR initiative, and OPEC, with the calculation of economic losses according to price scenarios of $3, $5, and $8 per (MMBtu).
Associated gas production in Iraq is carried out in conjunction with crude oil extraction from major oil fields, particularly in the southern fields of Basra governorate (World Bank, 2023) (4). Although Iraq has large reserves of associated gas, a large share of it is still flared due to limited infrastructure for collection and processing and insufficient investment, resulting in significant economic and environmental losses (Iraqi Ministry of Oil, 2022) (9).
The oil field data as shown in Table (3) indicate that associated gas production and flaring operations are concentrated in a limited number of major fields, such as Rumaila, West Qurna, Zubair, Majnoun, Halfaya, and Barjasiya, as these fields are associated with the significant expansion of crude oil production after the oil licensing rounds (Basra Gas Company, 2021) (8). It is noteworthy that the Rumaila field is one of the largest fields in terms of the volume of associated gas production, as its production reached about 5.5 billion cubic meters, while the quantities of burned gas reached about 2.0 billion cubic meters with a burning rate of about 36%, which is one of the lowest rates of comparatively burning among the major oil fields, and this reflects the presence of collection and processing projects that contributed to raising the efficiency of the exploitation of the produced gas (World Bank, 2023) (4).
Also, the West Qurna field recorded a flaring rate of about 37%, which is also among the lowest levels compared to some other fields, indicating a relative amount of gas collection and processing infrastructure. On the other hand, some oil fields show relatively high flaring rates, such as West Qurna/2, Majnoun, and Burgesiya, where the flaring rates exceeded 60%, which reflects the continued reliance on routine flaring due to limited investment and processing facilities and inadequate transmission and assembly networks (Al-Maamary et al., 2017) (3). Gas fields such as Okaz and Mansouriya recorded relatively low flaring rates of about 20% and 17%, respectively, due to their focus on gas production and investment rather than on crude oil production as a by-product (IEA, 2022) (7). The Kirkuk field, as a mixed oil/gas field, also recorded an average flaring rate of about 44%, reflecting a relatively better infrastructure compared to some other southern fields.
In general, the data indicate that the problem of gas flaring in Iraq is largely related to the rapid expansion of crude oil production over the past years without achieving a parallel expansion of associated gas investment projects, which leads to direct and indirect economic losses, including lost revenues, high gas import costs, and exacerbation of electricity problems (World Bank, 2023) (4).
Table (2). Associated Gas Production, Flaring, Reserves, and Economic Losses in Iraq (2000–2024).
|
Sunnah |
GP (Bcm) |
FG (Bcm) |
Burn Percentage % |
Reserve (TCF) |
Loss of $3 |
Loss of $5 |
Loss of $8 |
|
2000 |
3.5 |
2.8 |
80.0 |
110 |
307.8 |
513.0 |
820.8 |
|
2001 |
3.6 |
2.9 |
80.6 |
110 |
318.2 |
531.0 |
849.6 |
|
2002 |
3.8 |
3.0 |
78.9 |
111 |
329.4 |
549.0 |
878.4 |
|
2003 |
2.5 |
2.0 |
80.0 |
111 |
219.6 |
366.0 |
585.6 |
|
2004 |
3.0 |
2.4 |
80.0 |
112 |
263.5 |
439.2 |
702.7 |
|
2005 |
3.2 |
2.6 |
81.3 |
112 |
285.5 |
475.8 |
761.3 |
|
2006 |
3.5 |
2.8 |
80.0 |
113 |
307.8 |
512.4 |
819.8 |
|
2007 |
4.0 |
3.2 |
80.0 |
114 |
351.4 |
585.6 |
936.9 |
|
2008 |
5.0 |
4.0 |
80.0 |
115 |
439.2 |
732.0 |
1171.2 |
|
2009 |
5.5 |
4.4 |
80.0 |
116 |
483.8 |
805.2 |
1288.3 |
|
2010 |
6.5 |
5.1 |
78.5 |
118 |
560.0 |
933.3 |
1493.3 |
|
2011 |
6.3 |
5.0 |
79.4 |
120 |
549.0 |
915.0 |
1464.0 |
|
2012 |
6.8 |
5.4 |
79.4 |
122 |
592.9 |
988.2 |
1581.1 |
|
2013 |
7.1 |
5.7 |
80.3 |
124 |
625.6 |
1043.1 |
1668.7 |
|
2014 |
7.5 |
6.0 |
80.0 |
125 |
658.8 |
1098.0 |
1756.8 |
|
2015 |
7.3 |
5.8 |
79.5 |
126 |
636.1 |
1061.4 |
1697.5 |
|
2016 |
9.8 |
7.8 |
79.6 |
127 |
855.2 |
1427.4 |
2282.6 |
|
2017 |
10.1 |
8.1 |
80.2 |
128 |
888.2 |
1482.3 |
2370.5 |
|
2018 |
10.5 |
8.4 |
80.0 |
129 |
921.2 |
1537.2 |
2458.4 |
|
2019 |
11.5 |
9.2 |
80.0 |
130 |
1009.2 |
1683.6 |
2692.8 |
|
2020 |
7.0 |
5.6 |
80.0 |
130 |
614.9 |
1024.8 |
1639.7 |
|
2021 |
9.1 |
7.0 |
76.9 |
130 |
768.6 |
1281.0 |
2049.6 |
|
2022 |
9.3 |
7.2 |
77.4 |
131 |
790.6 |
1317.6 |
2108.2 |
|
2023 |
10.9 |
8.5 |
78.0 |
131 |
932.1 |
1555.5 |
2487.6 |
|
2024 |
11.1 |
8.9 |
80.2 |
131 |
975.5 |
1628.7 |
2604.2 |
Table (3). The most important oil and gas fields and the
rates of associated gas flaring in Iraq.
|
Location/Field |
Field Type |
Gas Production (BCM) |
Burnt Gas (BCM) |
Burn Percentage % |
|
Rumaila |
Oil |
5.5 |
2.0 |
36% |
|
West Qurna 1 |
Oil |
3.8 |
1.4 |
37% |
|
West Qurna 2 |
Oil |
3.5 |
2.2 |
63% |
|
Zubair |
Oil |
2.5 |
0.9 |
36% |
|
Majnoon |
Oil |
2.2 |
1.4 |
64% |
|
Halfaya |
Oil |
1.5 |
0.9 |
60% |
|
Al-Bazarkan |
Oil |
1.2 |
0.8 |
67% |
|
Powder |
Oil |
1.0 |
0.6 |
60% |
|
Kirkuk |
Oil/Gas |
1.8 |
0.8 |
44% |
|
(Akkas) |
Gas |
0.5 |
0.1 |
20% |
|
Al , Mansouriya |
Gas |
0.6 |
0.1 |
17% |
Source: Prepared by the researcher based on data from Basrah Gas Company, World Bank reports, GGFR initiative, and OPEC reports, with approximate estimates of the distribution of production and incineration by fields.
3.1.2.2 Direct and indirect economic losses resulting from the flaring of associated gas in Iraq.
The associated gas flaring in Iraq is one of the most prominent manifestations of economic waste in the energy sector, as it results in the loss of a natural resource with high economic and productive value. The associated gas burned in oil flares can be invested in electricity generation, petrochemical industries, fertilizer production, and liquefied natural gas, making continued flaring a double loss of economic resource loss and additional costs of providing energy alternatives (World Bank, 2017) (6).
Direct economic losses are the monetary value of the gas burned itself, i.e. the revenues that would have been generated if it had been invested or sold. Many studies indicate that Iraq loses billions of dollars annually due to the continued flaring of associated gas, especially amid increased oil production and rising global gas prices. Al-Jubouri's (2021) (5) study showed that investment in associated gas can directly reduce the fuel and gas import bill and generate additional financial returns for the public budget.
The indirect losses are also shown by the impact of the burn in the electricity and energy sector. Iraq suffers from a large gap between electricity supply and demand, while large quantities of gas capable of powering power plants are being burned. This pushes the country to use more expensive alternative fuels or to import gas and electricity from abroad, which increases the financial burden on the national economy (Al-Maamary et al., 2017) (3).
An indirect economic impact is also the disruption of opportunities for economic diversification, as associated gas is a key input for the petrochemical, fertilizer, and many manufacturing industries. Consequently, the continued burning deprives the Iraqi economy of opportunities to establish high-value-added industries that can create jobs and increase the industrial sector's contribution to GDP (Bazilian et al., 2014) (2). Gas flaring also leads to environmental and health losses with long-term economic repercussions, as it emits large quantities of pollutants such as carbon dioxide, methane,
sulfur oxides, and nitrogen, which contribute to air pollution and increase rates of respiratory and other environmental diseases. Some applied studies confirm that these effects increase health expenditure and reduce economic productivity in areas near oil fields (Mokhatab et al., 2019) (10). Thus, the losses resulting from the flaring of associated gas in Iraq extend beyond the market value of the flared gas to include high energy costs, continued dependence on imports, limited economic diversification, and environmental and health costs. Reducing gas flaring and making efficient investments are therefore strategic steps to support economic development and energy security in Iraq. The estimate of direct economic losses from associated gas flaring was based on the conversion of flared gas volumes from one billion cubic metres (Bcm) to one million British thermal units (MMBtu), assuming that every 1 Bcm is equivalent to approximately 36.6 million MMBtu. The cash losses were calculated according to three natural gas price scenarios: $3, $5,
and$8 per MMBtu, to show the sensitivity of the value of the loss to changes in gas prices in international markets.
The results of Table (2) show that the total amount of gas burned during the period (2000-2024) amounted to about 133.8 billion cubic meters, compared to a total associated production of about 168.4 billion cubic meters, thus the average burn rate during the study period was about 79.6%. This percentage reflects a clear increase in waste levels, as it indicates that the bulk of the associated gas has not been diverted to electricity or industrial production inputs but has been disposed of by incineration. In the low-price scenario of $3 per MMBtu, cumulative economic losses totalled about $14.68 billion during the study period, with an annual average of approximately $587.36 million. In the average scenario of $5 per MMBtu, which is the scenario adopted in the fundamental analysis, the cumulative losses amounted to about $24.49 billion, with an annual average of approximately $979.45 million. In the high price scenario of $8 per MMBtu, cumulative losses rose to about $39.17 billion, with an annual average of approximately $1.57 billion. The time comparison shows that losses exhibited a clear upward trend with increased burning, as the loss under the $5 scenario increased from about $513 million in 2000 to about $1.63 billion in 2024. The year 2019 also recorded the largest loss in the chain, amounting to about $1.68 billion in the $5 scenario and about $2.69 billion in the $8 scenario, due to an increase in gas burned to about 9.2 Bcm. In contrast, 2003 recorded the lowest relative loss due to reduced production and burning that year, with a loss of about $366 million in a $5 scenario. This quantitative analysis suggests that economic losses are not just direct financial figures, but rather reflect the value of a lost alternative opportunity. The burned quantities could have been used to power plants, reduce fuel imports, or support the petrochemical and fertilizer industries, thereby boosting non-oil GDP. Therefore, the rise in cash losses across price scenarios reflects the sensitivity of the Iraqi economy to delays in accompanying gas investment and confirms that reducing flaring is not only an environmental measure but also an important economic and investment option for reducing waste and promoting economic diversification.
3.2 Econometric Results
3.2.1 Results of the Gas Flaring Model
Table (4). ADF Time series test (Unit Root) for the period (2000-2024)
|
Variable |
Statistics (Level) |
P-value (Level) |
Results |
Statistics (I,0) |
P-value (I,0) |
Results |
|
ngdp |
0.7851 |
0.9914 |
Non-Stationary |
−3.1799 |
0.0345 |
Stationary |
|
fg |
0.7292 |
0.8199 |
Non-Stationary |
−2.9238 |
0.0580 |
Stationary |
|
elec |
1.9812 |
0.9997 |
Non-Stationary |
−3.5788 |
0.0147 |
Stationary |
|
Oil price |
−1.8864 |
0.3326 |
Non-Stationary |
−4.0049 |
0.0057 |
Stationary |
|
eff |
−0.6362 |
0.8437 |
Non-Stationary |
−4.0612 |
0.0052 |
Stationary |
3.2.1.1 Unit Root Test
The table is prepared by the researcher based on the results of the Eviews 12 program. The results of the time series stability tests (unit root) as shown in Table (4) indicate that through the application of the Augmented Dicky-Fuller (ADF) test based on the probability value (P-value), and as the results of Table (4) indicate, all the study variables are stable at the first level I(1) at the levels of significance (1%, 5%) , 10%, except for the burn variable (FG) which stabilized at the level of only 10%, indicating its acceptance at the significance level of I(0) (non-stationary).
3.2.1.2 Con-integration testing using the bound test.
After confirming the stability of the variables at the boundary, the bound test was used within the framework of the ARDL model, in order to verify the existence of a long-term equilibrium relationship between the study variables represented in the non-oil GDP (NGDP) and the associated gas flaring (FG), electricity (ELEC), oil prices and exploitation efficiency. The results of the table (5) indicate that the statistical value of F reached 22.75, which is higher than the upper critical values I(1) at all levels of significance, as the upper value at the level of 1% reached about 4.66, which leads to the rejection of the hypothesis of nullity and the acceptance of the alternative hypothesis that indicates the existence of a long-term relationship and the existence of a cointegration between the study variables.Within the framework of the (ARDL) Model, to verify the existence of a long-term equilibrium relationship between non-oil GDP (NGDP) and associated gas flaring, electricity (ELEC), and oil price. The results of Table (5) showed that the statistical value of F reached 22.71526, which is a value that exceeds the upper critical values at all levels of significance (10%, 5%, and 1%), as the upper critical value at the level of 5% was about 3.67 and at the level of 1% about 4.66, which means rejecting the nullity hypothesis that there is no long-term equilibrium relationship between the variables, and accepting the alternative hypothesis that indicates that there is a co-integration between the model variables. This result indicates that the variables studied, despite their short-term fluctuations, are moving together towards a stable equilibrium trajectory in the long term, reflecting the structural correlation between Iraq's non-oil GDP and both gas and electricity flaring and oil prices, and that these variables have long-term and stable effects.
Table (5). Bound Test Schedule
|
F-Bounds Test Null Hypothesis: No levels relationship |
||||
|
Test Statistic |
Value |
Signif |
I(0) |
I(1) |
|
Asymptotic: n=1000 |
||||
|
F-statistic |
22.71526 |
10% |
2.37 |
3.2 |
|
k |
3 |
5% |
2.79 |
3.67 |
|
|
|
2.5% |
3.15 |
4.08 |
|
|
|
1% |
3.65 |
4.66 |
|
Actual Sample Size |
24 |
Finite Sample: n=35 |
||
|
|
|
10% |
2.618 |
3.532 |
|
|
|
5% |
3.164 |
4.194 |
|
|
|
1% |
4.428 |
5.816 |
|
|
|
Finite Sample: n=30 |
||
|
|
|
10% |
2.676 |
3.586 |
|
|
|
5% |
3.272 |
4.306 |
|
|
|
1% |
4.614 |
5.966 |
The table is prepared by the researcher based on the results of the 12Eviews program
3.2.2 Results of the Gas Utilization Efficiency Model
3.2.2.1 Bound Test.
The results of the boundary test as shown in Table (8) showed that the F-statistic value was 129.9576, which is significantly higher than all the upper critical values at various levels of significance, including the upper critical value at the level of 1%, which leads to the rejection of the hypothesis of nothingness and the acceptance of the alternative hypothesis that confirms the existence of co-integration between the model variables. This finding suggests that non-oil GDP, gas and electricity efficiency, and oil prices move together in the long run along a stable equilibrium trajectory, despite short-term fluctuations.
Table (6). ARDL Long Run Form and Bounds Test
|
Dependent Variable: D(NGDP) Selected Model: ARDL(1, 1, 0, 0) Case 2: Restricted Constant and No Trend Sample: 2000 2024 Included observations: 24 |
||||
|
Levels Equation Case 2: Restricted Constant and No Trend |
||||
|
Variable |
Coefficient |
Std. Error |
t-Statistic |
Prob. |
|
FG_BCM |
2.529893 |
0.607472 |
4.164621 |
0.0006 |
|
ELEC_TWH |
0.760015 |
0.072446 |
10.49072 |
0.0000 |
|
OIL_PRICE |
0.005687 |
0.005508 |
1.032417 |
0.3156 |
|
C |
-10.14645 |
0.491804 |
-20.63110 |
0.0000 |
The table is prepared by the researcher based on the results of the 12Eviews program
3.2.1.4 Short-run Results (ECM)
The Error Correction Model was estimated to capture short-term dynamics and to determine the speed at which variables return to long-term equilibrium after temporary shocks and deviations.
The results of Table (7) showed that the coefficient of change in the flaring of associated gas D(FG) was -0.2569, but it was statistically insignificant, as the probability p-value was about 0.7388, and this result indicates that short-term changes in the quantities of flared gas do not directly and immediately affect the non-oil GDP, and this can be explained by the effect of the change in flaring is not directly transmitted to the economic sectors, but through indirect channels through the increase in public expenditure or improving infrastructure. The results also showed that the CointEq (-1) error correction coefficient reached -0.8052 and came statistically negative and significant at the level of 1%, which means that any deviation from the long-term equilibrium in the system is gradually corrected in subsequent periods, at a rate of approximately 80.5% per year, which indicates the speed of the Iraqi economy's response to changes in energy variables and a return to the long-term equilibrium path.
Table (7). ARDL Error Correction Regression
|
Dependent Variable: D(NGDP) Selected Model: ARDL(1, 1, 0, 0) Case 2: Restricted Constant and No Trend Sample: 2000 2024 Included observations: 24 |
|||||
|
ECM Regression Case 2: Restricted Constant and No Trend |
|||||
|
Variable |
Coefficient |
Std. Error |
t-Statistic |
Prob. |
|
|
D(FG_BCM) |
-0.256941 |
0.758742 |
-0.338641 |
0.7388 |
|
|
CointEq(-1)* |
-0.805177 |
0.068340 |
-11.78200 |
0.0000 |
|
|
R-squared |
0.849200 |
Mean dependent var |
2.416667 |
|
|
|
Adjusted R-squared |
0.842345 |
S.D. dependent var |
0.775532 |
|
|
|
S.E. of regression |
0.307931 |
Akaike info criterion |
0.561773 |
|
|
|
Sum squared resid |
2.086072 |
Schwarz criterion |
0.659944 |
|
|
|
Log likelihood |
-4.741272 |
Hannan-Quinn criter. |
0.587818 |
|
|
|
Durbin-Watson stat |
2.577264 |
|
|
|
|
|
* p-value incompatible with t-Bounds distribution. |
|
||||
The table is prepared by the researcher based on the results of the 12Eviews program
3.2.2 Results of the Gas Utilization Efficiency Model
3.2.2.1 Bound Test.
The results of the boundary test as shown in Table (8) showed that the F-statistic value was 129.9576, which is significantly higher than all the upper critical values at various levels of significance, including the upper critical value at the level of 1%, which leads to the rejection of the hypothesis of nothingness and the acceptance of the alternative hypothesis that confirms the existence of co-integration between the model variables. This finding suggests that non-oil GDP, gas and electricity efficiency, and oil prices are moving together in the long run in a stable equilibrium trajectory, despite temporary fluctuations in the short term
.
Table (8). Bound Test
|
F-Bounds Test Null Hypothesis: No levels relationship |
||||
|
Test Statistic |
Value |
Signif |
I(0) |
I(1) |
|
Asymptotic: n=1000 |
||||
|
F-statistic |
129.9576 |
10% |
2.37 |
3.2 |
|
k |
3 |
5% |
2.79 |
3.67 |
|
|
|
2.5% |
3.15 |
4.08 |
|
|
|
1% |
3.65 |
4.66 |
|
Actual Sample Size |
24 |
Finite Sample: n=35 |
||
|
|
|
10% |
2.618 |
3.532 |
|
|
|
5% |
3.164 |
4.194 |
|
|
|
1% |
4.428 |
5.816 |
|
|
|
Finite Sample: n=30 |
||
|
|
|
10% |
2.676 |
3.586 |
|
|
|
5% |
3.272 |
4.306 |
|
|
|
1% |
4.614 |
5.966 |
The table is prepared by the researcher based on the results of the 12Eviews program
3.2.2.2 Long-run Results
The results of the model, as shown in Table 9, indicate that the efficiency coefficient reached -19.414 and was significant at the 10% level, indicating a long-run relationship between efficiency and non-oil GDP. This negative result may be due to the rentier nature of the Iraqi economy, as most of the limited improvements in efficiency occur during periods of weakness in the
non-oil sectors' contribution, thereby making the apparent statistical impact negative. On the other hand, the electricity coefficient reached 1.114 and was significantly at the 1% level, indicating that electricity is an influential factor in supporting non-oil GDP. While the oil price coefficient was 0.0023, it was not statistically significant, indicating a weak direct impact of oil prices on non-oil GDP.
Table (9). ARDL Long Run Form and Bounds Test
|
Dependent Variable: D(NGDP) Selected Model: ARDL(1, 1, 0, 0) Case 2: Restricted Constant and No Trend Sample: 2000 2024 Included observations: 24 |
||||
|
Levels Equation Case 2: Restricted Constant and No Trend |
||||
|
Variable |
Coefficient |
Std. Error |
t-Statistic |
Prob. |
|
EFF |
-19.41049 |
10.30758 |
-1.883128 |
0.0759 |
|
ELEC_TWH |
1.114015 |
0.028744 |
38.75683 |
0.0000 |
|
OIL_PRICE |
0.002301 |
0.005918 |
0.388911 |
0.7019 |
|
C |
-2.554115 |
5.145936 |
-0.496336 |
0.6257 |
The table is prepared by the researcher based on the results of the 12Eviews program
3.2.2.3 Short-run Results (ECM)
The results of the error correction model in Table (10) showed that the CointEq (-1) coefficient came in negative and statistically significant at the level of 1%, where it reached -0.822, which confirms the existence of a self-correction mechanism that restores the relationship between the variables to its long-term equilibrium path. This result indicates that about 82.2% of short-term imbalances are corrected within one year.
The results also showed that the efficiency variable had a positive effect in the short term, indicating that improving the efficiency of associated gas utilization can support non-oil GDP in the immediate term, but this effect may not persist as strongly in the long term due to structural constraints in the Iraqi economy.
Table (10). ARDL Error Correction Regression Dependent Variable: D(NGDP)
|
Dependent Variable: D(NGDP) Selected Model: ARDL(1, 1, 0, 0) Case 2: Restricted Constant and No Trend Sample: 2000 2024 Included observations: 24 |
|||||
|
ECM Regression Case 2: Restricted Constant and No Trend |
|||||
|
Variable |
Coefficient |
Std. Error |
t-Statistic |
Prob. |
|
|
D(EFF) |
35.78421 |
9.441443 |
3.790121 |
0.0013 |
|
|
CointEq(-1)* |
-0.822189 |
0.029175 |
-28.18130 |
0.0000 |
|
|
R-squared |
0.834080 |
Mean dependent var |
2.416667 |
||
|
Adjusted R-squared |
0.826538 |
S.D. dependent var |
0.775532 |
||
|
S.E. of regression |
0.322999 |
Akaike info criterion |
0.657321 |
||
|
Sum squared resid |
2.295225 |
Schwarz criterion |
0.755492 |
||
|
Log likelihood |
-5.887849 |
Hannan-Quinn criter. |
0.683366 |
||
|
Durbin-Watson stat |
2.449287 |
|
|
||
|
* p-value incompatible with t-Bounds distribution. |
|||||
The table is prepared by the researcher based on the results of the 12Eviews program
4. Conclusions:
This study demonstrates that associated gas is a strategic resource capable of supporting non-oil economic growth in Iraq when utilized efficiently. The empirical analysis confirms a stable long-run relationship between non-oil GDP and the selected explanatory variables, indicating that the management of associated gas is an important determinant of economic performance. The findings further reveal that routine associated gas flaring adversely affects non-oil economic activity, whereas improving gas utilization efficiency strengthens productive sectors and supports economic diversification. In addition, electricity generation was found to play an important role in promoting non-oil GDP, while international oil prices continue to exert an indirect influence on economic activity through their impact on public revenues. Overall, the study concludes that maximizing the economic utilization of associated gas, rather than continuing routine flaring, is essential for enhancing energy security, increasing domestic value added, and supporting sustainable non-oil economic development in Iraq.
References:
1.Sovacool B. How long will it take? Conceptualizing the temporal dynamics of energy transitions’, Energy Research & Social Science. 2026;13:202-215. https://doi.org/ 10.1016/j.erss.2015.12.020
2.Bazilian, M, Onyeji I, Liebreich M. Energy access and economic development’, Energy Strategy Reviews. 2014; 5
3.Al-Maamary H, Kazem H. and Chaichan M. The impact of oil price fluctuations and gas flaring on economic development’, Renewable and Sustainable Energy Reviews. 2017; 75.5(1):989-1007.DOI:10.1016/j. rser. 2016. 11.079
4.World Bank.Global Gas Flaring Reduction Partnership (GGFR) Report. Washington, DC: World Bank. 2023.
5.Al-Jubouri A K. Economics of Associated Gas Investment in Iraq and its Impact on Economic Development, Master's Thesis, Faculty of Business and Economics, University of Baghdad.2021.
6.World Bank. Iraq Gas Flaring Reduction Technical Assistance Project. Washington, DC: World Bank.2017.
7.EIA. Iraq Country Analysis Brief. Washington, DC: U.S. Energy Information Administration.2024.
8.Shell Iraq. Basrah Gas Company Project Reports. Baghdad: Shell Iraq.2024.
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أثر حرق الغاز المصاحب وكفاءة استثماره في الناتج المحلي الإجمالي غير النفطي في العراق للمدة (2000–2024): دراسة قياسية باستخدام نموذج الانحدار الذاتي للفجوات الزمنية الموزعة (ARDL)
جمال محمود نجيب العبيدي
كلية الإدارة، جامعة النور، موصل ، العراق
هدفت الدراسة إلى تحليل أثر استثمار الغاز المصاحب في الناتج المحلي الإجمالي غير النفطي في العراق خلال المدة (2000–2024)، مع التركيز بصورة خاصة على ظاهرة حرق الغاز المصاحب وما يترتب عليها من آثار اقتصادية وتنموية. واعتمدت الدراسة نموذج الانحدار الذاتي للفجوات الزمنية الموزعة (ARDL) لتحليل العلاقة بين الناتج المحلي الإجمالي غير النفطي، وحرق الغاز المصاحب، وكفاءة استثمار الغاز، وكفاءة قطاع الكهرباء، وأسعار النفط العالمية. وأظهرت نتائج اختبارات السكون والتكامل المشترك وجود علاقة توازنية طويلة الأجل بين متغيرات الدراسة. كما بينت النتائج أن استمرار حرق الغاز المصاحب يؤدي إلى هدر موارد اقتصادية قيّمة ويحد من قدرة الاقتصاد العراقي على تحقيق التنويع الاقتصادي. وفي المقابل، فإن تحسين كفاءة استثمار الغاز المصاحب يسهم في دعم قطاع الكهرباء، وتقليل الاعتماد على استيراد الطاقة، وتعزيز النشاط الاقتصادي غير النفطي. وخلصت الدراسة إلى ضرورة التوسع في مشاريع جمع الغاز المصاحب ومعالجته واستثماره، وربطها بالقطاعات الإنتاجية، بما يسهم في الحد من عمليات الحرق وتحقيق عوائد اقتصادية وتنموية مستدامة.