Iraq: The Pace of Oil Expansion
Copyright
2010 Energy Intelligence Group, Inc.
Friday, January 29, 2010
Iraq's two oil licensing rounds have set the stage for the biggest, fastest oil expansion ever seen -- a boost of 9.5 million barrels per day that would blast production to 12 million b/d within seven years, according to official targets. Baghdad's actual performance is likely to be far more restrained, while still involving considerable growth, according to Energy Compass calculations. Some industry experts reckon total flows in excess of 6 million b/d are easily achievable in that period -- on a technical level -- assuming Opec doesn't shackle Iraq before it gets there.
Under a best-case scenario prepared by Energy Compass, the potential for an Opec quota decision arises as early as 2012, when Iraqi production would push past 3.5 million b/d, placing Iraq on par with Iran, its neighbor and former foe. Parity between Iran and Iraq has historical standing in Opec affairs dating to the 1970s and 1980s, and is considered a key marker by other Opec delegations (EC Nov.6,p3).
Under Energy Compass' alternative "shortfall scenario" -- which includes logistical and other constraints -- the Opec debate is delayed only slightly. This scenario assumes that early growth stays largely on track, but that serious shortfalls emerge in later years due to operational obstacles, insufficient water injection, export capacity constraints and potential reservoir performance issues.
Unrestrained, Iraq would rival Saudi Arabia's current production in 2014 and its capacity two years later in the best-case scenario, but would fail to match the kingdom on either count in the shortfall scenario. The two scenarios offer an insight into how Iraq's production might ramp up without Opec constraints. But the profiles will change over time as work on the ground advances.
An Opec allocation of 4 million-5 million b/d for Iraq could be a blessing in disguise for those companies that pitched ambitious production targets to score awards. This was especially the case with the first-round contracts for Rumaila (2.85 million b/d target), Zubair (1.2 million b/d) and West Qurna-Phase 1 (2.325 million b/d). Some insiders say more likely figures for these giant southern fields may be closer to 1.9 million b/d, 900,000 b/d and 1.2 million b/d, respectively. The plateau target figures in the second round were less inflated, but oil executives say inadequate infrastructure and logistical bottlenecks are more likely to prevent companies from cranking up these largely untapped fields. More rapid results will come from first round fields that are already up and running.
Rumaila, Iraq's biggest producer, is expected to deliver the quickest gains. Partners BP and China National Petroleum Corp. (CNPC) can start to recover costs and get paid for their services once flows rise 10% above initial production of 1.066 million b/d. State South Oil Co. (SOC) head Dhia Jaafar tells Energy Compass he expects that to happen swiftly -- even before the end of this year. The immediate plan is to work over existing wells and BP has already issued a raft of tenders.
For all 10 of Iraq's development projects, extensive drilling programs come top of the list -- and there will be a race for rigs and crews. For the prized fields in the south, which contain mainly heavy oil that is poorer in quality than other Mideast structures, the drilling effort could prove hard work. "Ask yourself what it took to get some of the largest Saudi oil fields on stream -- in an unobstructed manner," says a Western oil executive. "Build-ups to rates of this magnitude in Iraq will take longer." It took Saudi Aramco about five years to develop the Khurais oil field to its full rate of 1.2 million b/d.
Major fields in Saudi Arabia had initial well rates in the tens of thousands of barrels per day, whereas Iraq's giant southern fields will average 1,000-5,000 b/d, says Peter Wells, founding director of geological consultancy Neftex Petroleum. On the production side alone, Iraq will need about 10 times the number of wells to match the Saudi level and perhaps 20 times when water or gas injection -- likely to be required even in the early stages -- is included. To get an extra 1 million b/d initially, assuming operators cherry-pick the best reservoirs first, Iraq will probably require 300-600 wells, he estimates -- which would involve some 80-150 rigs operating over a two-year period. Scale this up to 4 million-5 million b/d of new oil, involving other reservoirs, and some 200-400 rigs would have to work flat out over a five-to-10 year period.
Copyright
2010 Energy Intelligence Group, Inc. Friday, January 29, 2010
Iraq's two oil licensing rounds have set the stage for the biggest, fastest oil expansion ever seen -- a boost of 9.5 million barrels per day that would blast production to 12 million b/d within seven years, according to official targets. Baghdad's actual performance is likely to be far more restrained, while still involving considerable growth, according to Energy Compass calculations. Some industry experts reckon total flows in excess of 6 million b/d are easily achievable in that period -- on a technical level -- assuming Opec doesn't shackle Iraq before it gets there.
Under a best-case scenario prepared by Energy Compass, the potential for an Opec quota decision arises as early as 2012, when Iraqi production would push past 3.5 million b/d, placing Iraq on par with Iran, its neighbor and former foe. Parity between Iran and Iraq has historical standing in Opec affairs dating to the 1970s and 1980s, and is considered a key marker by other Opec delegations (EC Nov.6,p3).
Under Energy Compass' alternative "shortfall scenario" -- which includes logistical and other constraints -- the Opec debate is delayed only slightly. This scenario assumes that early growth stays largely on track, but that serious shortfalls emerge in later years due to operational obstacles, insufficient water injection, export capacity constraints and potential reservoir performance issues.
Unrestrained, Iraq would rival Saudi Arabia's current production in 2014 and its capacity two years later in the best-case scenario, but would fail to match the kingdom on either count in the shortfall scenario. The two scenarios offer an insight into how Iraq's production might ramp up without Opec constraints. But the profiles will change over time as work on the ground advances.
An Opec allocation of 4 million-5 million b/d for Iraq could be a blessing in disguise for those companies that pitched ambitious production targets to score awards. This was especially the case with the first-round contracts for Rumaila (2.85 million b/d target), Zubair (1.2 million b/d) and West Qurna-Phase 1 (2.325 million b/d). Some insiders say more likely figures for these giant southern fields may be closer to 1.9 million b/d, 900,000 b/d and 1.2 million b/d, respectively. The plateau target figures in the second round were less inflated, but oil executives say inadequate infrastructure and logistical bottlenecks are more likely to prevent companies from cranking up these largely untapped fields. More rapid results will come from first round fields that are already up and running.
Rumaila, Iraq's biggest producer, is expected to deliver the quickest gains. Partners BP and China National Petroleum Corp. (CNPC) can start to recover costs and get paid for their services once flows rise 10% above initial production of 1.066 million b/d. State South Oil Co. (SOC) head Dhia Jaafar tells Energy Compass he expects that to happen swiftly -- even before the end of this year. The immediate plan is to work over existing wells and BP has already issued a raft of tenders.
For all 10 of Iraq's development projects, extensive drilling programs come top of the list -- and there will be a race for rigs and crews. For the prized fields in the south, which contain mainly heavy oil that is poorer in quality than other Mideast structures, the drilling effort could prove hard work. "Ask yourself what it took to get some of the largest Saudi oil fields on stream -- in an unobstructed manner," says a Western oil executive. "Build-ups to rates of this magnitude in Iraq will take longer." It took Saudi Aramco about five years to develop the Khurais oil field to its full rate of 1.2 million b/d.
Major fields in Saudi Arabia had initial well rates in the tens of thousands of barrels per day, whereas Iraq's giant southern fields will average 1,000-5,000 b/d, says Peter Wells, founding director of geological consultancy Neftex Petroleum. On the production side alone, Iraq will need about 10 times the number of wells to match the Saudi level and perhaps 20 times when water or gas injection -- likely to be required even in the early stages -- is included. To get an extra 1 million b/d initially, assuming operators cherry-pick the best reservoirs first, Iraq will probably require 300-600 wells, he estimates -- which would involve some 80-150 rigs operating over a two-year period. Scale this up to 4 million-5 million b/d of new oil, involving other reservoirs, and some 200-400 rigs would have to work flat out over a five-to-10 year period.