Iraq does not plan to lower its 12 million barrel per day oil output capacity goal or to redo contracts with oil firms over their plateau targets, Deputy Prime Minister for energy Hussain al-Shahristani said on Sunday.
Shahristani also said the oil ministry had reached a final draft contract on a $12 billion project to capture associated gas at southern oilfields and sent the deal to Iraq’s cabinet for approval.
Work in Iraq has proceeded on a very large scale, in most cases on or near the schedule set in detailed contracts let to international oil companies. The companies have invested over $5 billion within the past year, a meaningful portion of it unrecoverable bonuses. Announcements from operators of three major field-development projects—BP, ExxonMobil, and Eni—in the past few months confirmed that they had achieved or exceeded contractual targets. Production increases under these contracts have combined to boost Iraqi exports by 300,000 b/d
Iraq’s oil reserves may rival those of Saudi Arabia. Iraqi geologists and engineers, citing field data and conservative estimates of recovery from oil in place, place the number at well over 200 billion bbl.
Yet Iraq ranks 12th in the world in oil production capacity and recently has produced about 2.4 million b/d, about 25% of Saudi output. Its cumulative production is just 25% that of Saudi Arabia’s. Average annual output peaked in 1979 at 3.5 million b/d and has never again exceeded 2.8 million b/d, despite very low costs of development and production. Iraq’s oil costs were estimated to be the lowest in the world in a 1995 IEA report.
A quick and large upgrade of Iraq’s oil port facilities is needed. Work is contracted, funded, and under way. But completion of an initial increment of capacity is at least a year away until a series of four 800,000 b/d single-buoy moorings is installed. This will raise southern export capacity to nearly 5 million b/d when all the moorings are installed
Current officials are planning large investments in major pipelines between southern and northern Iraq. There is excess export capacity of nearly 1 million b/d on the pipeline between northern Iraq and Ceyhan, Turkey, on the Mediterranean. In 2010 Turkey and Iraq signed a firm agreement to upgrade and expand this line.
Another possible outlet for Iraqi oil is the Iraqi-built and financed IPSA 2 pipeline alongside much of Saudi Arabia’s large east-west trunkline with a terminal on the Red Sea. IPSA 2 has been closed since Iraq’s invasion of Kuwait in 1990, and Saudi Arabia has shown no sign of reopening it. Iraq and Syria have discussed rebuilding the 700,000-b/d export line to Banias on the Mediterranean and have conducted physical surveys and estimates. A final commitment has not been reached, and political turmoil in Syria may make this project problematic in the near term.
As with nearly all onshore production, the long-term maintenance of higher levels of production in Iraq rests on the capacity to conduct secondary recovery. While at least one consortium has considered using natural gas to support part of those needs, a massive water system is required.
Water will have to be moved from the gulf through a complex pipeline system to producing fields. The oil ministry tapped ExxonMobil to head up the planning. The project will be enormous; a capacity of 12 million b/d of water is foreseen. This is on par with the huge Abqaiq system in Saudi Arabia.
Costs have been estimated at over $10 billion. It is not certain how the project will be financed. Initially, a completion date for the project was set at 2013, but a more conservative timetable is likely.