<Ex-oil minister warns Iraq fields being ruined
By NELSON ANTOSH
Copyright 2004 Houston Chronicle
The average daily output from Iraqi oil fields needs to be capped at 2 million barrels per day, according to the country's former oil minister, who said added production would further damage the world's second-largest underground deposits of crude.
Iraq's output rose swiftly from 1 million barrels per day last August to 2 million barrels per day as of November, with some people speculating about restoring production to approach 3 million barrels per day, the production level before the invasion.
With OPEC agreeing to cut production by millions of barrels, there will be even more attention on bringing back Iraq's production to feed world markets.
But Issam Al-Chalabi, Iraq's oil minister from 1987 until 1990, said mismanagement has hurt reservoirs. During 13 years of economic sanctions against Saddam Hussein, the fields were overpumped, and millions of barrels of hydrocarbon waste — certain types of refined product and even crude oil — were reinjected into the holes, he said.
It was one thing for the damage to occur during Saddam Hussein's rule, "but why is it continuing today?" he said while speaking Tuesday at the Cambridge Energy Research Associates conference at the Westin Galleria, adding that the abuse was common knowledge in the industry.
Signs of trouble include rising water levels in some reservoirs and the loss of production from some wells.
For the benefit of the reservoirs, there needs to be testing, studies and well workovers, but no such subsurface work has been done, Al-Chalabi said. Halliburton is being paid to do only surface work, he said.
Al-Chalabi was oil minister until he was relieved of his duties after the invasion of Kuwait. In 1991 he settled in Kuwait and started the Al-Sanam Petroleum & Economic Consultancy, which re-established offices in Baghdad last year.
Cambridge predicts that Iraqi output will average 2.3 million to 2.4 million barrels per day for this year. Pumping at 2 million barrels would leave about 1.5 million barrels per day for export.
That slowed-down growth is one factor Cambridge predicts will keep oil prices high, predicting an average of $29 per barrel this year and $26.25 for 2005.
Another factor was OPEC's action, which risks high prices today out of concern for weaker prices in a few months, Cambridge director James Burkhard said. OPEC decisions are contributing to an environment where oil prices are likely to range from the mid to upper $20s to the low $30s per barrel in 2004 and 2005, Burkhard said.
The other factors are sizzling economic growth in China, expansion in the United States and worries about terrorism in Saudi Arabia.
Exports out of Russia, which last year regained its title as the world's largest oil producer, are being hampered by bottlenecks in infrastructure such as pipelines.
Russia's oil output jumped by 800,000 barrels per day last year. This year it is expected to grow by 550,000 barrels per day and in 2005, only by 250,000 barrels per day, according to Cambridge.
Steven Theede, chief operating officer of Yukos Oil and president of Yukos-Moscow, said at the conference that the challenge is being able to export its crude oil in a cost-effective way.
This is unlike its reservoirs, which are capable of delivering double-digit increases for years to come.
Last year, with export pipelines essentially full, Yukos had to export about one-third of its crude oil by rail, Theede said, not a very effective method of transportation.
More and more, Yukos and the other Russian oil companies have been utilizing Western technologies.
"The results speak for themselves: Russia is on the brink of breaking through the 9 million-barrel-per-day production milestone, and potential still exists for further increases through optimization and efficiency improvements, without even getting into the potential for development of new fields and reserves," Theede said.>
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