21 September 2005
Iraq is unlikely to see any major change in its current 2.2 million barrels per day of production capacity or in the paralysis of its northern export route until late 2006 or early 2007 at the earliest, according to former Oil Minister Thamer al-Ghadban. Upstream progress will only come with the implementation of recently awarded contracts and others under consideration, he told International Oil Daily Tuesday on the sidelines of the Oil & Money conference in London.
Iraq is producing about 1.8 million b/d from its southern fields and 400,000 b/d from the north, with the latter mostly refined domestically. Average exports from the south are around 1.5 million b/d.
Budget limitations and banking formalities, including the opening of letters of credit, have delayed contract awards and project implementation in the past two years, but recent awards and upcoming projects could start to improve production facilities from next year, said al-Ghadban.
“I think the direct impact on the enhancement of production capacity will come from the workover and completion of wells and drilling of new wells, as well as the implementation of water injection projects, because the surface capacity is available in most fields but the major problem lies with the wells,” said al-Ghadban, a member of Iraq’s National Assembly, or parliament.
“I expect to see drilling companies operating inside Iraq in 2006, at least in the south where the security problem is less acute than in the north,” he added.
According to the Iraqi official, drilling and water treatment projects would add up to 500,000 b/d of capacity by end-2006, while three engineering, procurement and construction (EPC) contracts awarded since the beginning of this year would contribute about 250,000 b/d. Despite earlier overoptimistic pronouncements by Iraq’s oil ministry, he insisted this scenario is “realistic.”
Higher production rates — similar to the 2.3 million b/d achieved in the first half of 2004 — could not be maintained because of a lack of investment in facilities, including reservoir pressure maintenance; delays in the completion of the Qarmat Ali water plant and cluster injection stations at the southern fields; and delays in wet crude treatment capacity, al-Ghadban said.
“All these problems led to a decline in the reservoirs’ potential, especially at North and South Rumaila and at Kirkuk,” he said.
“We tried to avert the decline by approving a number of contracts for completion of 60 wells in the south and wet crude treatment facilities, as well as tendering new well drilling contracts,” he added. All have been delayed.
Furthermore, sabotage attacks on the pipeline network, including the export line from Kirkuk to the Turkish terminal of Ceyhan, resulted in the “entrapment” of some 300,000 b/d of capacity.
Water treatment projects are expected to be carried out next year at Kirkuk, as well as water injection projects at Bai Hassan in the north and at North and South Rumaila in the south. The first phase of the Qarmat Ali water plant — which started under the US-led reconstruction effort two years ago, and covers 35% of its potential — has been achieved, but a second stage doubling that level to 70% is not yet complete.
EPC contracts for development of the Khurmala Dome in Kirkuk, Himrin field in the north and the southern Subba-Luhais fields have an average execution period of 22 months. The Khurmala Dome project is expected to add 100,000 b/d, while the two other projects should add 60,000 b/d and 80,000 b/d, respectively.
“I believe we will be able to arrest the decline in the fields in the first half of 2006 and start adding capacity by the end of the year,” al-Ghadban said.
Although the deployment of military units to protect the pipeline network in northern Iraq is 80% complete between Kirkuk and the Fatha bridge near Baiji, only the implementation of a high technology “safety corridor” would allow stable exports from Kirkuk to the Turkish terminal of Ceyhan, al-Ghadban said.
The project involves a combination of fixed stations and monitoring systems, a trained and highly mobile ground force and air surveillance.
According to al-Ghadban, the safety corridor contract was approved earlier this year and should be awarded soon. On-the-ground implementation will be carried out by Iraq’s State Co. for Oil Projects.
“First there will be a pilot project which will take a year to implement, followed by a feasibility study on the solutions, costs and timing of the permanent infrastructure,” he said. “This is the only long-term solution for the northern export dilemma we are facing.”
By Ruba Husari, London
(Published in International Oil Daily Sept.21, 2005)