Despite Baghdad’s push to drum up oil sector investment, foreign majors continue to balk at the opportunities on offer. Exxon’s decision to walk away from a major project has profound implications for Iraq’s ambitious upstream expansion plans.

ExxonMobil has exited talks with Iraq’s oil ministry for one of the sector’s most critical infrastructure projects – the long-delayed Common Seawater Supply Project (CSSP). The project is essential if Iraq is to...