Nihad Mousa, is the Director General of State Co for Oil Projects (Scop). She is the first Iraqi woman to hold the position of director general in the Iraqi oil ministry’s companies. In this interview with Ruba Husari in Baghdad, she spells out Scop’s role in the unprecedented expansion of the oil infrastructure that will cater for the increase in crude oil output over the next few years.
Q: Scop is building a tank farm in Al-Faw in southern Iraq as part of the crude oil export capacity expansion. What’s the progress on this project to date?
A: Scop had an old commitment to build 16 storage tanks of 300,000 barrels capacity each in Al-Faw and South Oil Co. (SOC) was to build another eight in that area, so the total storage capacity would be 7.2 million bbl. This is a project that is several years old and the schedule has been delayed several times, not because of Scop, but because of the lack of funds at one point, or because the procurement contracts were awarded to companies that did not deliver. At the time we could not contract with the manufacturers directly so we had to deal with middle companies who were not up to it. We only started getting the material we need last year and now we have seven out of the first batch of eight tanks almost finished. As for the second batch of eight tanks, we are still facing problems with the contracted company and the issue is being discussed within the ministry to try and find other solutions. As for other facilities, we are almost done with the installation of eight booster pumps. The piping is also complete. Power generation turbines are expected at the end of 2012. We signed a contract with Siemens in early summer and expect delivery within 18 months of the signing. The contract for the 10 main pumps is currently under evaluation by a technical team jointly with Foster Wheeler, the project manager for the export terminal expansion, to insure compatibility with the offshore infrastructure. We expect this to be done by the end of the year so that the onshore Al-Faw tank farm will be ready and fully operational by mid-2013.
Q: The first phase of the offshore export facilities currently being built will be ready by the end of this year, with two out of five SPMs (single-point mooring) being built ready to start loading up to 1.8 million b/d of crude. Can they be used even if Al-Faw onshore facilities are not ready?
A: We were instructed by the minister earlier this year to look into the possibility of pumping oil from the Zubair storage directly to the SPMs. This is a fast-track interim solution that we worked on. We are installing a 27 km long pipeline from Zubair-1 to Zubair-2 and connect from there to the offshore facilities while bypassing Al-Faw tank farm. The capacity of the pipeline will be 900,000 b/d and it will feed the two new SPMs. This should be commissioned by December. It will be enough for the scheduled increase in production and exports through 2012. We are also looking into adding another 900,000 b/d capacity by the end of 2012, but this is still under evaluation from a technical point of view. We are not sure it can be done. But once Al-Faw tank farm is fully operational, the new pipeline we have built for the interim phase will be put on standby.
Q: You are on the steering committee negotiating with ExxonMobil on the CSSF (common seawater supply facility) project which has been delayed several times. What’s the state of that contract and is the main disagreement over cost as it has been reported?
A: Cost is only one item but it’s not the only problem we had with Exxon. Their cost estimate for the 2 million bbl of water facility was twice as high as Scop’s, and they agreed that we review it to try and find out why it was that much lower. They then increased the capacity of the project to 4.2 million bbl of water and presented another cost estimate, and we continued the discussion on that. But again, this was not the obstacle. The problem is that Exxon was the assigned developer and concluding an agreement took a long time especially that they are the developer on behalf of others and at the same time a user of the water facility for field injection, together with the other field operators BP, Eni, and Lukoil. The implementation of the project was to be contained in the development agreement which is a complex agreement. When Exxon submitted the draft agreement we found clauses that were not acceptable to the ministry. For example, Exxon did not want to commit to the project once the FEED (front-end engineering and design) was completed and wanted to keep an option to pull out. For the ministry, this meant a waste of time and money since the new developer might decide to do his own FEED. Another example is a clause in the development agreement whereby Exxon would pursue certain aspects of the FEED on their own even after they choose to pull out from the development agreement when the FEED is completed. This complicates our work if we were to decide to tender the project under EPC (engineering, procurement and construction) contracts. So it was not acceptable to us. There were other differences over cost recovery as the ministry suggested cost recovery starts once production reaches 20% instead of the 10% stipulated in the technical service contract for other cost recovery. BP objected to this. So as you see there were lots of issues that delayed the agreement. By early July we realized we cannot reach an agreement so the ministry’s decision was that Exxon can complete the pre-FEED work and then we ask SOC to seek expression of interest from consultants who can prepare the FEED, the EPCs and support us for the execution of the EPCs. In this case, the ministry would provide the financing for that. That’s when Exxon came back and said they are willing to adjust the agreement and committed to follow through as the developer. We also agreed that the cost for the pre-FEED and FEED is $250 million, which also includes long lead items such as pipelines. This is the cost required till 2012. We expect that the agreement would be ready for signing soon.
Q: Scop is also supposed to undertake other projects in support of the IOCs work in southern Iraq. Are you able to deliver to the IOCs standards and timeline?
A: Working with the IOCs is new to us but we are included on the vendors list for tenders most of the time. We are also present for technical support on the JMCs (joint management committees) and on technical committees for the projects run by IOCs. We have so far been asked to carry out parts of projects or even entire projects such as degassing stations. Our handicap is that as a public company, we have restrictions when it comes to purchasing and it takes too long to get the approvals required, so we cannot commit to timelines when purchasing is involved. What we are doing which is new to us, is cooperating with foreign companies who are in our line of business. Since we cannot have joint ventures, what we are doing is building an alliance with those engineering companies for specific projects. Under memoranda of understanding, we make a joint bid where we undertake to do the part which is more suitable while they take care of what we cannot do, such as the engineering and the procurement parts. We signed MOUs with companies like Hyundai, Samsung, Saipem, SPECC and we have other requests from others such as Orascom and JGC. We are currently working on presenting a joint offer with Hyundai for the installation of a degassing station for Zubair field. We are also in discussion with SPECC to carry out a project for a 36” pipeline from Majnoon to Tuba. What is not our speciality, like building camps or carrying out rehabilitation work, we turn down. But we did flow lines for BP in Rumaila field by direct contract. We also have a request from Exxon to do flow lines in West Qurna-1 field. Whenever the material is available, we do not have a problem. We can carry it out because we know the area, we have the data and access and we are committed to standards.
Q: Can you prequalify to bid for sub-contracts on your own?
A: No, prequalification is a problem because for a very long time we were restricted to our country. Our specs are not necessarily in line with the stamping used internationally. Sometimes they ask us, for example, for HSE systems, and they are impressed with what we did. But as to the prequalification format, we don’t have the stamping. This is an obstacle. That’s why we focus at the moment on working on projects with others until we can qualify. For example, Hyundai can qualify, and as a partner I will accept to work as sub-contractor with them to get the experience. I lose by not getting the contract myself, that’s true, but we need to familiarize ourselves with the international standards; how to qualify and how to work within the timelines. Whenever the material is available, we can do the construction work and we can deliver on time. We still have problems with tools which we have to import. The new thing is that we can now rent from foreign companies because when they do mobilization they bring all sort of specialized tools and equipment that we need. There are now service companies in Basrah that are providing this under sub-contracts too. Manpower is not a problem either for us.
Q: Do you see this problem being solved on the long term? Will you be able to compete with foreign companies in tenders?
A: Teaming up with others and improving our tools will help us solve the problem on the longer term. We are importing equipment at the moment but as a self-financed government company, I have to provide all supporting materials from my budget. Our operative budget is limited. We cannot provide enough funds to improve the tools we operate with. But now it has been accepted by the minister that we use some of our investment budget for certain projects, to buy equipment in order to accelerate the execution. We have placed orders and we expect by next year we will be in a better position.
Q: Is Scop involved in building infrastructure for the second bid round fields?
A: There are tank farms linked to the export facilities which are in Tuba, Nassiriya, Bin Umar in addition to PS1 that we are involved in. There is a commitment by IOCs to add storage capacity to those tank farms to cover the increase in production from their contract fields. However, Scop was asked to do project management and execution of those depots. We have completed a FEED for Nassiriya so far. We are expected to have this tank farm ready within 3 years. Although it was the contractors who were supposed to do these projects, each in his field, the conflict in schedule between them makes it more complicated to do at the same time. That’s why we were asked to do these projects instead. We now have the financial allocations and we will issue EPC tenders by Q1 2012 for Nassiriya and Bin Umar. Lukoil has proposed to tender the FEED for Tuba and the minister agreed. Scop is being considered as a subcontractor to Lukoil to carry out that FEED. We will also propose to build the pipelines from these depots to Al-Faw.