Two Years On, Iraq Output Still Struggling

9 March 2005

Almost two years after the US-led war ousted the Baath regime, Iraq is still struggling to meet prewar production levels at its dilapidated oil fields.

Iraq’s southern oil fields, which accounted for the majority of prewar production of 2.8 million barrels per day, are currently managing just 1.85 million b/d — and even this rate is causing great distress to reservoirs, Iraq’s interim Oil Minister Thamer al-Ghadban said Tuesday.

Iraq’s oil ministry has been allocated a $3 billion budget in 2005 to restore former production and raise levels by developing producing fields. However, that budget is contingent on oil revenues, which have been cut by at least one-third over the past year due to sabotage. Iraqi export levels have fallen by at least 30% in recent months.

“We have been exporting 1.45 million b/d on average over the past seven days from the south,” al-Ghadban told International Oil Daily from Baghdad.

According to a preliminary loading schedule compiled by Energy Intelligence, Iraq is set to export a total of 41 million bbl, or 1.32 million b/d in March, compared with 40.1 million bbl, or 1.43 million b/d, for February.

Exports from the northern Kirkuk complex have dried up since mid-December, following a series of attacks on pipelines that link the producing fields to the export terminal of Ceyhan in Turkey.

Despite the revenue shortages, Iraq is determined to carry out much-needed repair work at its producing reservoirs, said al-Ghadban.

“Last year we had zero investments in our fields so there was no way we could sustain production levels. This year, we have the money allocated and we have drawn up plans. Now it’s a question of starting implementation,” he said.

Like everything else in Iraq over the past two years, work in the oil sector is slow to progress. Political wrangling has also delayed the formation of a government after national elections on Jan. 30, although the elected National Assembly is due to hold its first session Mar. 16.

To sustain production at current levels and raise it modestly, the ministry has prepared a three-plank strategy for implementation over the next few months.

The first part involves sorting out power supply problems that are hampering water injection for pressure maintenance at the southern Rumaila and Zubair fields. Regular power cuts bring water pumping to a standstill.
This factor was a key consideration in State Oil Marketing Organization’s (Somo) decision to shave term contract volumes by 10% from February, after it realized it would not be able to honor commitments to clients.

The second part covers wet crude treatment. Many oil wells have been suspended after technical problems with the increasing water cut in crude produced. Treatment projects would enable production to restart at those wells, and even for their levels to be ramped up.

The third part of the strategy covers the connection of previously drilled wells to surface facilities. The addition of such new wells would ease the pressure on exhausted wells, and replace dilapidated ones.

“We have to carry out all this work both in the southern and northern fields, or add new production through the drilling of new wells, if we want to sustain our current production capacity or even increase it,” al-Ghadban said.

US drilling and well service company Weatherford was awarded a contract in November to drill 60 wells at Rumaila, comprising 30 new producer and 30 injector wells, but has yet to carry out the work. Late last year, a Weatherford executive told International Oil Daily the contract was under review due to security issues and the economics of the project, as a result of the rise in steel prices.

Even if Weatherford gets to start this work, completion of the drilling operations would take at least 18 months.

In January 2004, the Pentagon awarded two contracts worth up to $2 billion — to Halliburton’s Kellogg, Brown and Root, and a joint venture of US Parsons and Australia’s Worley — to repair oil infrastructure in northern and southern Iraq. However, rehabilitation following extensive looting and sabotage has advanced at a snail’s pace, due to security concerns and the allocation of a significant chunk of the funds for overheads and protection.

By Ruba Husari, London

(Published in International Oil Daily March 9, 2005)

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