November 29th, 2017

Bid Round Five

 

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By tendering new blocks for exploration, all of them close to the border with either Iran or Kuwait, Iraq is trying to catch up on the effort to increase its oil and gas reserves that has been interrupted by two major wars with the two neighbors in 1980 and 1990.

To convince international oil companies to participate in this round, the fifth since Iraq opened its oil sector to foreign operators in 2009, and the second that focuses on exploration rather than field development, the oil ministry said it will introduce a new model contract and a new mechanism for awarding contracts. Though details still need to be worked out, the new model is supposed to improve significantly on the previous technical service contracts of the last four bid rounds.

The prequalification process of potential participants is about to be completed and results are expected to be announced by next week when data packages will be available for purchase.

Oil minister Jabbar Luaybi said Nov 27 in Baghdad that the ministry will invite companies to propose fiscal and commercial terms before it finalizes a new model contract taking into consideration those proposals. According to the initial schedule announced by the oil ministry, a road show is planned for late January before the first draft model contract is shared with the interested companies in late February. A workshop will be organized in April to give the companies the opportunity to debate the initial model contract before the final contract and tender protocol are issued by the end of May 2018. The awards are, for now, scheduled for June 21.

Exploration drilling by the national oil exploration company in most of the blocs tendered was ongoing when the wars with Iran in 1980 and with Kuwait in 1990 took place. Some discoveries of fields and structures were made but were never properly assessed. The national effort to pursue further exploration since 2003 has been limited. It resulted in discoveries like Sindbad, close to the Iranian border in 2013, but only a widespread exploration effort by international oil companies could lead to significant increases in oil and gas reserves.

Some of the blocks on offer stand out due to the early indications of significant oil or gas deposits. Shihabi block which extends between the provinces of Missan and Wasit draws attention due to the proximity of the discovered structure to the Dehluran oil field on the opposite side of the border inside Iran. Brazil’s Petrobras shot the first seismic survey in the Shihabi area in 1975, followed by further seismic by Iraq’s own surveyors between 1978-1983. Exploration drilling planned on the structure in 1980 was interrupted by the Iran-Iraq war. The discovered structure is about 32 km long and 1.5-3 km wide. A 1998 ministry study estimated about 14.5 billion barrels of oil in place (OIP) in the Shihabi structure.

Another interesting block is Zurbatiya in Wasit and Diyala provinces which contain two structures; Zurbatiya and Tariq. The Zurbatiya structure, according to the ministry’s data, is a giant structure of 40 km long and 9 km wide, which is believed to be entirely within the Iraqi territory despite its proximity to the border line. A French company shot the first seismic on this structure in 1978. The first exploration well was planned in 1980 but was also interrupted by the start of the Iran-Iraq war. The oil ministry’s data estimates the probable OIP at about 8.8 billion bbls.

The Naft Khana block, also along the border with Iran, includes about 10 fields and leads including Naft Khana, Nawdoman and Tal Ghazal fields as well as southern Naft Khana structure. Naft Khana oil field has been in production for several years from the initially discovered reservoir though output is dwindling, standing currently at 1600 b/d feeding the Daura refinery in Baghdad.

The Huwaiza block in Missan province contains two structures; Huwaiza and southern Huwaiza. The first exploration well in Huwaiza was drilled in 1980 and oil was discovered in the Khasib and Nahr Umar formations, as well as indications of oil in Hartha, Saadi and Mishrif formations. A 2005 study estimated probable OIP in southern Huwaiza at 2.4 billion bbls.

The Sindbad block falls in the high hydrocarbon potential area surrounded by the Majnoon, and Nahr Umar oil fields and Siba gas field. The first exploration well was drilled in the Sindbad structure in 1974 followed by the second well in 2013 where oil was discovered in the Yamama reservoir. Estimates put OIP at some 2.15 billion bbls and reserves at 645 million bbls.

Fao, Jebal Sanam and Khider AlMai, mostly in Basrah province, are located near the Kuwaiti border. Fao block, bordering both Kuwait and Iran, is surrounded by the Zubair and Nahr Umar oil fields and Siba gas field. Both the Um Qasr structure in Fao block and Jebal Sanam block structure straddle the border into Kuwait. One well was drilled in each in 1978.

Khider AlMai block which extends into both Basrah and Muthana provinces, not far from the giant Rumaila oil field, appear to be of higher potential as it includes several discovered fields and leads such as Khider AlMai, Raji and Jerishan.

Khider Al-Mai field is located 80 km southwest of the giant Rumaila oil field. It was first drilled in 1980 and resulted in the discovery of significant gas content in the Nejma formation.

Raji field located 36 km to the southwest of the Rattawi field was first drilled in 1956 followed by a second exploration well in 1976. Oil was discovered in the Nahr Umar, Zubair and Yamama reservoirs with an API of 28, 31.9 and 39 respectively. Of the original oil in place (OOIP), oil ministry data estimate 740 million bbls of oil are probable and 420 million bbls are proven, in addition to 2.387 tcf of probable gas and 64.7 bcf of proven gas. As for the original reserves, it estimates 1.851 billion bbls are probable and 1.051 billion bbls are proven, along with 59.7 bcf of probable gas and 16.2 bcf proven.

Jerishan field, just 25 km to the southwest of the giant south Rumaila oil field has one well drilled where 19 API oil was discovered in Nahr Umar reservoir. Of the OOIP, ministry data estimate 70 million bbls of probable oil and 24.5 million bbls proven.

The Arabian Gulf block is the first offshore exploration block to be tendered by Iraq with one identified lead. The block spreads over 400 square kilometers in the Iraqi territorial waters. Incidentally, Kuwait is also looking to launch offshore exploration in the Mideast Gulf in the near future.

Iraq tendered 12 blocks for exploration in the last (fourth) bid round but only 3 were awarded.

Bid Round 5 Calendar
9/11/2017: Deadline for submission of prequalification documents
29/11/2017: Announcement of prequalification results
24/12/2017: Deadline for submission of proposals for the commercial model
25/1/2018: Roadshow
28/2/2018: Draft model contract and initial tender to be issued
15/3/2018: Deadline for participants’ comments on draft model contract
30/4/2018: Workshop to discuss participants’ comments
31/5/2018: Definitive contract and final tender protocol to be issued
21/6/2018: Submission of bids and awards

The View from Baghdad