Iraq revising oil output target; 7-8 mil b/d considered: Luaibi
Vienna (Platts)--9Jun2011/653 am EDT/1053 GMT
Iraq's Oil Ministry is waiting for a report by international consultants
before deciding the extent of a cut in oil output expansion targets from
southern fields and may slash original estimates down from 12 million b/d to
around 7-8 million b/d over an extended plateau period, Oil Minister Abdul
Karim Luaibi said Wednesday.
"We have completed the first phase of discussions with international
consultants and we've offered to another consultant. In two to three weeks,
we'll have a better idea," Luaibi said on the sidelines of the OPEC meeting
Luaibi was elaborating on remarks made a day earlier where he suggested
Iraq was revising plans to raise crude oil output capacity to over 13 million
b/d within seven years from 2.7 million b/d currently.
Under the terms of 12 long-term service contracts awarded in two bidding
rounds in 2009 and 2010, foreign oil companies were to raise output from the
fields awarded to a plateau target within seven years of the contract coming
into effect. The majority of contracts, with a few exceptions, specify that
plateau production be maintained for a further seven years.
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"Some contracts were concluded on the basis of a plateau for seven
years. Our ambition now is to extend the plateau from seven to 13-14 years so
that the infrastructure that we're building for this target can be used for
years to come. Production could be 7-8 million b/d with the lengthening of
the plateau, which would be more economical and more realistic," Luaibi said.
Achieving this level of output will require massive amounts of water
injection at major fields such as Zubair, Rumaila and the West Qurna
structure. Luaibi said water reinjection volumes would be amended in line
with lower output targets. The US' ExxonMobil, consortium leader for West
Qurna 1, is leading the water injection project, which at one point envisaged
using 10 million b/d of treated seawater piped from the Persian Gulf.
"We have started briefings on the project. There's been a change in the
amount of water that's needed," Luaibi said, adding that operating companies
had submitted new figures. The project will be conducted in stages, he said.
The first phase will be for 2 million b/d of water injection within three
years, rising to 1.5 million b/d in a second phase. The third phase has not
yet been determined.
"We've started to look at new scenarios for our production levels, so
the water injection will be determined by the final production figure to be
agreed," Luaibi said.
Iraq is expanding export infrastructure to cope with the additional
crude oil being produced from Rumaila, Zubair and West Qurna 1, all of which
attained their 10% increment within the first year of operation rather than
the contractual three. This has led to bottlenecks and Luaibi said some
output was being held back.
Iraq is adding two single point moorings each of 900,000-1 million b/d
capacity at southern export terminals and is building a land pipeline which
will be ready by the end of July, Luaibi said. Completion of this first phase
will add 1 million b/d to southern export capacity of around 1.8 million b/d.
The second phase expansion will be completed by 2013, taking export
capacity from southern ports to 5 million b/d.
Iraq also has several export pipeline projects planned, including three
pipelines -- two crude oil and one gas pipeline -- through Syria.
The northern crude oil export pipelines running from the Kirkuk fields
to Ceyhan in Turkey has capacity to carry 650,000 b/d but is running at less
than 500,000 b/d, he said.
"There is an old line and a more modern line. We want to repair the
infrastructure damage and the aim is to raise capacity to 1 million b/d in
2013," Luaibi said.
He again referred to declines in output from the giant Kirkuk field
though he gave no figures. "The field is suffering from a lot of problems. We
are on the verge of appointing a consultant to perform a new study on the
field," Luaibi said.
Experts believe Kirkuk, discovered in 1927 by the Iraq Petroleum Company
in which Shell was a shareholder, is in decline. Shell was awarded a contract
to carry out a technical study on Kirkuk in 2005.
Iraq's northern production accounts for around 700,000 b/d of total
output, estimated at 2.665 million b/d in May. Northern oil output in the
first four months of 2010, when there were no Kurdish exports, averaged
663,000 b/d and 649,000 b/d for the full year. This compares with an average
of 629,000 b/d in the first fourth months of 2011, discounting Kurdish oil
exports which resumed in early February. This would imply a decline of around
30,000 b/d with falls from Kirkuk offset by rises from other fields such as
Bai Hassan, Ajeel and Khabbaz.
Luaibi said the pipelines through Syria would link northern, central and
southern oil fields. The project is expected to begin in the next few months.
The crude pipelines will have capacity to transport 3 million b/d. "They
will link the center, south and north together in the same system. That will
give us flexibility to export from the north and the south," Luaibi said.
One pipeline will run regular crude, mainly from southern fields, and
the second will carry mainly heavy crude from a group of fields, including
Najmah in the north. Luaibi said the heavy blend would be crude with an API
gravity of over 20 and the regular crude pipeline will carry crude of around
Asked about the status of the Nassiriyah field, which Iraq has been
negotiating for years with a Japanese consortium, Luaibi said four rigs were
operating at Nassiriyah and the field was producing 40,000 b/d in the first
phase. The Iraqi side had proposed that the project be developed as one
package to include a refinery.
"We've proposed to the Japanese that the project will be one package
with a 300,000 b/d refinery in Nassiriyah. If a party can present an
integrated project, it will be better for us. We don't have the capacity to
export from there," he said.