THE big money is on oil – that is the primary focus in Iraq. As indicated above, current output is about 2million bpd, but the ambition is 12million bpd within six or seven years.
The latest analysis by US analyst IHS CERA is pessimistic and suggests that achieving levels about half that in the next decade would be more likely and would still constitute “a significant expansion”.
IHS CERA’s current outlook for Iraq is 4.3million bpd in 2015 and 6.5million bpd in 2020 – still big growth numbers. Others are of a broadly similar opinion, including insiders.
The RevenueWatch Institute’s view is that fields previously discovered but still undeveloped represent the backbone of the future oil industry in the short and medium term.
Author Kamil al-Mehaidi says that if these fields are sufficiently developed in the next five years, they will add new production of about 3.5-4 million bpd.
If the remaining output from the current producing fields is added, Iraq’s production capacity will reach about 5.5-6million bpd, says Mehaidi in a report originally published in Arabic in 2006.
Geological studies have shown that Iraq has about 530 structures with good hydrocarbons prospects.
The Mehaidi report indicates that only about a quarter of these have been drilled until now, and the remaining ones are still pending. It is thus expected that many other joint fields, straddling provinces, will be discovered.
Proven reserves stand at 115billion barrels (US EIA), with probables doubling that to more than 200billion barrels.
However, Dr Salah Baker, of Grampian Petroleum in Aberdeen – who is also a future potential Iraqi oil minister and an exile of some 30 years – suggests that the real figure could be far higher – at least 400billion barrels.
And because most of the natural gas so far encountered in Iraq is associated with oil, Baker is convinced that the gas resource could be far higher, too.
Iraq is currently ranked number 10 in the global gas reserves league table with 3trillion cu m (about 110trillion cu ft).
However, based on Baker’s view about oil, the gas resource could be in the order of 12-14TCM, which could push Iraq up to third in the league table – placing it potentially in front of the Former Soviet Union.
Baker’s estimate is based on the likelihood that Iraqi oilfields broadly possess the same ratio of oil to gas (GOR).
“We have a report that Iraq could have more gas resources than the Former Soviet Union itself, which is a really significant piece of information. Most of it would be located in the south,” Baker told Energy.
“Gas exploration in Iraq has been minimal. Reality is that we don’t know how many gas fields there are.”
There is, however, an eight-year Russian study carried out in the 1970s that points to far more gas than is currently assumed. Other than the Russian work, Baker says there is no such thing as a detailed study of Iraqi petroleum resources.
“The 115billion barrels of oil estimate came from 2D surveys carried out many years ago,” he said.
“And 90% of Iraq has never been surveyed. If 3D seismic was to be applied to some of the existing areas, you might find that there are multiple stacked reservoirs, so resulting in a huge increase in the oil plus associated gas reserves base.
“And if the rest of the country was surveyed, there could be many surprises. In Iraq, the rate of finding oil so far is 70%. There aren’t many places in the world where the success rate is as high.
“The discovery rate for gas is even higher … 90%.
“Because the discovery rates are so high, this is seen as justification for spending only the base minimum on further seismic survey.
“And, by the way, Iraq has the cheapest production costs in the world … even lower than Saudi Arabia … less than $1 per barrel, because it is onshore and the wells are very productive.”
As a listed priority, gas is subordinate to oil, with production levels of about 200billion cu ft per day recorded in the late-1980s. However, there is a 10-year plan supposedly mapped out.
Two gas-focused licence opportunities were offered in the Iraq recovery programme’s first petroleum licensing round, of which only one was bid, and the authorities declined the offer.
Gas opportunities were also offered in the second round. According to results posted on the ministry of oil website, there were no bids. Further opportunities are on offer in the current third round.
It is important to realise that the background to Iraq’s hydrocarbons is one of immense political and social flux since the war of 2003.
The current oil ambition would be immensely challenging even had Iraq been stable and not in a postwar condition.
The situation is further complicated by the recent elections and subsequent protracted efforts to form a new government.
This, in turn, could inflame existing sectarian and other tensions in the country, and the security of foreign workers (even though Iraq is demanding a 98% local personnel content in all production contracts and the supply chains linked thereto) will remain a significant issue in the eyes of some, though not all, non-Iraqi corporate participants.
IHS CERA warns in its report: “Iraq’s expansion timetable appears extraordinarily ambitious in comparison to the recently completed capacity increase in Saudi Arabia. Saudi Arabia has significant security and infrastructure advantages, yet it took Saudi Arabia between four and five years to expand its net output capacity by some 2million barrels per day. Iraq will certainly be challenged to match this pace, much less exceed it.”