September 26th, 2010

Gas Exploration, A Government Priority?

 

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As Iraq’s third bid round for gas field development drags on, mired by successive delays, with no viable commercial structure in the draft model contract and confusion over the utilization of gas to be produced, Iraq’s next government is better off focusing on increasing Iraq’s gas reserves by launching an exploration drive to find new gas resources and develop them.

Iraq has 65 defined exploration blocks on its maps, the biggest of which lie in the very little explored Western Desert. Those blocks can measure up to 10,000 square kilometers and in a few cases can be as big as 17,000 square kilometers.

Iraq’s exploration effort stopped three decades ago and the minor exploration activity that took place in the 1990’s resulted in the discovery of Akkas gas field in 1992 in the Western Desert close to the Iraqi-Syrian border. All other previous gas discoveries from older dates were concentrated in the north-eastern area of Iraq.

Even Jordan has for a long time been touting the Risha gas field development on the merit of its proximity to Iraq’s non-explored but presumed-rich Western Desert. Their assumptions were based on the very few geological surveys carried out in the area some time ago.

Baghdad is in desperate need for natural gas and is way behind its neighbors in exploring for gas reserves and monetizing what has already been discovered. Though there is no lack of public engagements, promises and verbal commitments to export volumes of Iraqi gas, whether to Europe or neighboring countries, the fact remains that those gas volumes do not currently exist. Iraq is yet to finalize a commercial agreement to monetize the associated gas being flared from its southern oil fields despite being in negotiations with Royal Dutch Shell for more than two years. The volumes of gas to be produced from the three fields currently tendered, assuming they are eventually awarded, are modest compared to Iraq’s current gas deficit and burgeoning gas demand.

An exploration bid round associated with the right commercial framework for exploration and development of gas fields is more likely to put Iraq on the right track to achieve self-sufficiency when it comes to power generation, create gas-based industries and to put Iraq on the gas exporters’ map.

The View from Baghdad