Iraq Energy Sector- Reality & Expectations · Iraq Energy Sector- Reality & Expectations ... Iraq-Jordan oil & gas pipelines project; ... Eni's Zubair and Exxon's WQ1 are understood

Iraq Energy Sector-

Reality & Expectations

Presentation delivered before

Brussels Energy Club

11 Sept 2014

Ahmed Mousa Jiyad

Development Consultancy and Research

Norway

[email protected] Tel: (+47) 5659 5699

© Copyrights 2014- Ahmed Mousa Jiyad, Iraq/Development Consultancy & Research, NORWAY

mailto:[email protected]



Acknowledgment & Disclaimer

I am thankful to Brussels Energy Club, Dr. Marat Terterov

and BEC’ colleagues for the kind invitation and for

profoundly helping with the necessary logistics.

The contents of the presentation are my own responsibility

and thus do not represent the views and positions of any

entity referred to in the presentation and/ or involved

directly and indirectly in organizing this event.

This contribution is for public knowledge and thus it is not

intended to and should not be construed as legal

recommendation and/or advice.


Focus & Agenda

Petroleum Sub-Sectors (O & G)

Exploration

Development & Production

Refining & Downstream

Export Outlets & Market Configuration

FDI: Participation, Promotion and Protection


Existential Threats & Challenges IS/ISIS- ”Da’esh”

FG-KRG Politics

Logistics, Infrastructure and Human Resources

Exploration: Augments Petroleum Proven Reserves

Current Proven Reserves: 143/150 bbl; 66 oilfields;

65 %

28 %

7 %

Oil in Place Reserves Remaining Proven Reserves Accumulated prod., at 1/1/2010


Iraq is the least explored major hydrocarbon

resource basin in the Middle East; has high success

rate over 70%

Exploration Program & Investment Allocation

in MoO Plan 2011-14

Exploration Program :

3 phases:

- Hold the BR4;

- Launch massive exploration operations throughout the country using national efforts and capacity;

- Drill 12 (10) exploration wells (in other areas) across the country

0

50

100

150

200

250

1 2 3 4

Plan's Year

Billio

n ID

s

18.6%

22.4%

26.8%

32.2%


Block

No.

Governorate/ Province

Area (km2) Gas Oil

1

Nainawa

7300

2

Nainawa and Anbar

8000

3

Anbar

7000

4

Anbar

7000

5

Anbar

8000

6

Anbar and Najaf

9000

7

Anbar, Babil, Najaf, Muthanna, Wasit

6000

8

Diyala and Wasit

6000

9

Basrah

900

10

Muthanna and Thiqar

5500

11

Najaf and Muthanna

8000

12

Najaf and Muthanna

8000

Total (km2)

52300

28400

Percentage of areas’ grand total

65%

35%

Areas Grand Total (km2)

80700

B4: 12 Exploration Blocks

Reality of exploration sub-sector

There are no credible evidences that 2011-14 exploration program has been fully executed;

No new exploration program has been adopted and announced by MoO;

Only 4 (Blocks 8G; 9,10,12O) out of 12 exploration blocks offered in BR4 were concluded;

Block 8 (Pakistan Petroleum Limited): no activity observed

Block 9 (Kuwait Energy Corporation (70% and operator) and Dragon Oil (30%)): -

completed an environmental impact assessment and environmental baseline

studies; - de-mining began June 2014; - Drilling exploration well began July

2014.

Block 10 (LUKOIL Overseas (the Operator) – 60% and Japanese INPEX Corp. – 40%):

2D seismic survey began in April 2014.

Block12 (Bashnift Russian (JSOC) (70%) & Premier British (PREMIER OIL)(30%)):

Linear 2-D work and 850 km2 of 3-D seismic should have begun in July 2014.

Second exploration blocks bid round involving 10 blocks was announced in March 2013 but then

put on hold!

Current security situation prevents exploration activities in significant part of the country

Proven reserves could increase when the analysis of new data from the signed SCs of BR1 &BR2

are completed.


SC

Signed

Jan

2013


O&G Development & Production

Bid

Round

Oil & Gas Fields

CPPT

(Mbd)

Proven

Reserves

(bbls)*

BR1

(6 OFs)

B-OFs: R, Z, WQ1 & Missan G: 3

OFs 7.335 33

BR2

(7 OFs)

G-OFs: Majnoon; WQ2; Halfaya;

Garraf; Badra; Qaiyara & Najma 4.765 33

Conver.. Al-Ahdab 0.2 1

Total 14 OFs:15 IOCs:12 Cs 12.3 67

BR3 (3 GFs) Green GF: Akkas; Siba; Mansuriya;

3 IOCs: 3 Cs

820 Mcfd 11.2 Tcf


Contracts Renegotiation

Contracted

PPT

1mbd/C: $15 billion initial investment

WB/B&Co; IEA


Negotiated Production Plateaus (Mbd)

Reduction in Production Plateaus of these fields by 3.87mbd (from 11.02 to

7.15mbd)would reduce Investment Requirements by $58 billion.

All contracted oilfields are on track, with some difficulty except

Qaiyara & Najma. Siba Gas field is on track while Mansuriya and

Akkas are not due to security conditions.

0

0,5

1

1,5

2

2,5

3

Zubair WQ1 Rumaila WQ2 Majnoon Halfaya

NPT OPT


Oil Production: Sept 2008- July 2014 (kbd)

0

500

1000

1500

2000

2500

3000

3500

4000

NOC&Md SOC&Ms TOTAL

NOC!!


Associated Gas Production & Utilization. Sept 2008- July 2014 (mmscfd)

BR1: BGC (HoA- Sept. 2008: BGC-May 2013)

BR2: Halfaya (Alkahla PS); LukOil (Proposes $4 billion petrochemical

complex to utilize associated gas from WQ2); Alahdab (AlZubaidia PS.)

Gas Flaring: “Iraq currently imports 500 metric tons to 1,000 tons of LPG a

day, while it flares 4,000 tons daily” 17 May 2013, Bouaziz/ Shell.

0

500

1000

1500

2000

2500

Prod Utilized

Flared Associated Gas-mmscfd


Refining & Downstream MoO Plan: Refining capacity (kbd-input)

Four new major refineries

Nassiriya (300 kbd)- $8bn; Missan (150 kbd)- $5bn

Kirkuk (150kbd)-$5bn; Karbala (140 kbd)-ca$5bn

The legal frameworks are outlined in two laws: Investment Law (No. 13 of 2006)

through NIC and the Refinery Investment Law (No. 64 of 2007). Contractual

terms outlined in 17 January 2012 invitation offer from MoO, London Conf.,

May 2012???

In addition to these new capacities the others to be renovated are Baiji, Doura refinery in Baghdad , Basra refinery in the south and Najaff.

2011 2012 2013 2014

575 640 680 700 ?/

Export

2012

A possible fifth plant may process heavy, sour

crude from the Najma and Qaiyara field

Satarem!!

Athil Nejeify

?/


Export Outlets, Capacity & Marketing

0

50

100

150

200

250

300

350

1,6

1,8

2,0

2,2

2,4

2,6

2,8

3,0

Export mbd-LHS

Rev$/d (mil)-RHS


Oil Export to Major Markets (%)

20

25

30

35

40

45

50

55

60

2007 2008 2009 2010 2011 2012

% o

f To

tal O

il E

xp

ort

s

Asia America Europe


J & E!

CSSP

8.5 mbd StoCap

Expand & Diversify Export Capacities & Outlets

Reality of been semi-landlocked

Export outlets (mbd)

NAG: 8.5

(5SPMs, BoT (1.6mbd) &

KoT (max 350kbd))

Syria: 4.5

(Rehab1.25; new 1.25 L/m

crude; 1.5 Hc)+ gas pipeline

Turkey: 1.6 (Upgrade K-C)

+ new oil and gas pipelines!

Nabucco??

Jordan: 10-15 kbd (Trucks)+ 1mbd&250mcfd Zerga-Aqaba!

**************

Egypt? IIS gas pipeline?

IPSA- oil pipeline?

ICOEE

FDI

Participation, Promotion and Protection

The Constitution;

Specific laws: Investment Law, Refinery Law

BIT/ Coms of economic and technical cooperation:

MIT:

Contracts: IA/ICC



Existential Threats & Challenges

ISIS Direct Effects In Nineveh province, IS controls ten oil fields, only four of which were already

in production: Qayara (20 kbd), Sufiyah (8kbd), Ain Zalah (7kbd) and West

Batma (2kbd). In Salahuddin province, it controls the Ajil (25kbd) and Himrein

(10kbd) fields. It's not clear, though, how much, if any, oil is still being

produced;

It also controls the Qaiyara refinery, an asphalt plant that uses very heavy 16

°API oil, from the field, is high in hydrogen sulphide and difficult to process

even at the best of times;

Disrupts Akkaz (Anbar ) and Mansuriya (Dayala) gas fields;

The 310,000 b/d Baiji refinery remains shut and a key ISIS target; the refinery

provides more than one third of the country’s need ( mostly for Kirkuk, Ninewah

and KRG) for refined products and provide fuel for Baiji power plant;

12-15 Kbd export to Jordan stopped;

Iraq-Jordan oil & gas pipelines project;

IOCs in KR

UN SC Resolution 2170, 15 August 2014, MoO statement on SOMO exclusivity


The New Government, DPM Energy, Oil Portfolio and the

composition of Energy Committee in the Parliament !!?

FG-KRG Politics: Complex and acrimonious relations with

reciprocal symmetrical blames-game

Pre & Post 9/10 June!!: KRG: Secession referendum; Kirkuk

oilfield; Article 140 accomplished!!;

Pre & Post Sinjar Mountain!! 1st week August;

The Military operations and air stricks!!!

Logistics, Infrastructure and Human Resources

Storage Tanks at Fao Plans call for at least 24 tanks, 365kb each , total 8.8mb. As on April 2014 only four tanks are installed

and operational and another four require testing; the remaining 16 were in various stages of construction.

MoO envisions adding another eight tanks, bringing total storage capacity to 11.7mb

Fao is a huge project requires also 10 gas turbine turbo pumps, which have a multi-year lead time to

manufacture and take between six months and one year to install and test. It will take until 2017 to

complete stage by stage.

Water Injection Requirements Delays to CSSP, which aims to pump some 7 mbd of treated seawater to all the southern oil projects, are

causing reduction in oil production and forcing investors to seek alternative solutions.

A lack of water injection has already obliged Exxon Mobil to reduce WQ1 output from around 500 kbd

to under 300kbd; while Shell could be capped at 600kbd on its planned 1 mbd Majnoon project; Lukoil's

1.2 mbd in WQ2 -- currently producing just over 320kbd -- will struggle to raise output beyond 450kbd

without water injection.

One option is to develop independent water projects separate from CSSP that would tap the Third River

(drainage water). Eni's Zubair and Exxon's WQ1 are understood to have approval to build their own

250kbd plants around the Third River, and Lukoil is investigating a similar-sized project for WQ2.

Relief currently available: WQ1is already taking some 70-80kbd from the Third River and Zubair, which

currently produces 340kbd, recently had water supply from Qarmat Ali increased to around 180kbd.



Rumaila is benefiting the most from Qarmat Ali's refurbishment, receiving 700kbd of

treated water in August, up from 500kbd in July. Rumaila's capacity has held steady

this year at around 1.3-1.4 mbd, but further production gains are unlikely in 2015,

sources say.

Human Resource and Institutional Capacity Gaps There are very critical systemic, knowledge and skills capacity gaps;

International cooperation opportunities- bilateral;

EUIEC.


Documents

Iraq Energy Sector- Reality & Expectations · Iraq Energy Sector- Reality & Expectations ... Iraq-Jordan oil & gas pipelines project; ... Eni's Zubair and Exxon's WQ1 are understood