From the same site, Sig ~~Re Iraqi oil...including China, Russia, France and Germany...
Post-U.N. Sanctions Development Plans
eia.doe.gov
In December 2002, the Council of Foreign Relations and the Baker Institute released a report on Iraq's oil sector. Among other things, the report concluded that: 1) Iraq's oil sector infrastructure is in bad shape at the moment, being held together by "band-aids," and with a production decline rate of 100,000 bbl/d per year; 2) increasing Iraqi oil production will require "massive repairs and reconstruction...costing several billions of dollars and taking months if not years;" 3) costs of repairing existing oil export installations alone would be around $5 billion, while restoring Iraqi oil production to pre-1990 levels would cost an additional $5 billion, plus $3 billion per year in annual operating costs; 4) outside funds and large-scale investment by international oil companies will be needed; 5) existing oil contracts will need to be clarified and resolved in order to rebuild Iraq's oil industry, with any "prolonged legal conflicts over contracts" possibly "delay[ing] the development of important fields in Iraq;" and 6) any "sudden or prolonged shut-down" of Iraq's oil industry could result in long-term reservoir damage; 7) Iraq's oil facilities could easily be damaged during any domestic unrest or military operations (in early February 2003, the Patriotic Union of Kurdistan claimed that Iraqi soldiers were mining oil wells in the north of the country in anticipation of war); and 8) given all this, a "bonanza" of oil is not expected in the near future.
According to the Middle East Economic Survey (MEES), problems at Iraqi oil fields include: years of poor oil reservoir management; corrosion problems at various oil facilities; deterioration of water injection facilities; lack of spare parts, materials, equipment, etc.; damage to oil storage and pumping facilities; and more. MEES estimates that Iraq could reach production capacity of 4.2 million bbl/d within three years at a cost of $3.5 billion, and 4.5-6.0 million bbl/d within seven years.
As of October 2002, Iraq reportedly had signed several multi-billion dollar deals with foreign oil companies mainly from China, France, and Russia. Deutsche Bank estimates $38 billion total on new fields -- "greenfield" development -- with potential production capacity of 4.7 million bbl/d if all the deals come to fruition (which Deutsche Bank believes is highly unlikely). Iraq reportedly has become increasingly frustrated at the failure of these companies actually to begin work on the ground, and has threatened to no longer sign deals unless firms agreed to do so without delay. Iraqi upstream oil contracts generally require that companies start work immediately, but U.N. sanctions overwhelmingly have dissuaded companies from doing so.
In 1992, Iraq announced plans to increase its oil production capacity to over 6.3 million bbl/d following the lifting of U.N. sanctions. This plan, which was to be accomplished in three phases over a five-year period, assumed billions of dollars worth of foreign investment. Much of the production was to come from giant fields in the south (Halfaya, Majnoon, Bin Umar, West Qurna), plus the Mishrif reservoir (Luhais, North and South Rumaila, Zubair, etc.), East Baghdad, and others.
Russia, which is owed billions of dollars by Iraq for past arms deliveries, has a strong interest in Iraqi oil development. This includes a $3.7 billion, 23-year deal to rehabilitate Iraqi oilfields, particularly the 11-15 billion barrel West Qurna field (located west of Basra near the Rumaila field). West Qurna is believed to have production potential of 800,000-1 million bbl/d. In a surprising and somewhat puzzling development, in mid-December 2002 the Iraqi Oil Ministry announced that it was severing its contract with the Lukoil consortium on West Qurna due to "fail[ure] to comply" with contract stipulations. Specifically, the Iraqis cited Lukoil's failure to invest a required $200 million over three years. Two other, smaller, stakes in West Qurna by Russian companies Zarubezhneft and Mashinoimport reportedly were left intact. In addition, three exploration and production deals were signed between Iraq and Russian companies (Soyuzneftegaz, Stroytransgas-Oil, and Tatneft, to develop the 100,000-bbl/d Rafidain field, the Western Desert's Block 4, and the Western Desert's Block 9, respectively). Despite all this, Russia's Foreign Ministry said that it viewed the Iraqi decision on Lukoil and West Qurna "with regret." In mid-February 2003, following a month of talks between the two sides aimed at reversing Iraq's decision, the Iraqis announced that its decision to cancel the Lukoil deal was "finished and the contract has been scrapped."
In October 2001, a joint Russian-Belarus oil company, Slavneft, signed a $52 million service contract with Iraq on the 2-billion-barrel, Suba-Luhais field in southern Iraq. Full development of Suba-Luhais could result in production of 100,000 bbl/d (35o API) at a cost of $300 million over three years. As of March 2002, Slavneft reportedly was awaiting approval from the United Nations to drill 25 wells as Luhais.
The Saddam field contains 3 billion barrels of oil and 5 trillion cubic feet (Tcf) of associated gas. Iraq is seeking foreign assistance for a second-phase Saddam development, which would raise oil production capacity to 50,000 bbl/d, as well as 300 Mmcf/d of gas. In early April 2001, Russia's Zarubezhneft received U.N. approval to drill 45 wells in the Saddam field, plus Kirkuk and Bai Hassan, as part of an effort to reduce water incursion into the fields.
The largest of Iraq's oilfields slated for post-sanctions development is Majnoon, with reserves of 12-30 billion barrels of 28o-35o API oil, and located 30 miles north of Basra on the Iranian border. In the 1990s, French company Elf Aquitaine (now merged with Total as TotalFinaElf) negotiated on a possible $4 billion deal with Iraq on development rights for Majnoon. In 1999, however, TotalFinaElf declined to sign a 23-year production sharing agreement (PSA) with Iraq on Majnoon. Following this, the field reportedly was brought onstream (under a "national effort" program begun in 1999) in May 2002 at 50,000 bbl/d. Future development on Majnoon ultimately could lead to production of 450,000 bbl/d within two years or so at an estimated (according to Deutsche Bank) cost of $4 billion. Eventually, Majnoon could produce significantly more oil than that, possibly well above 1 million bbl/d.
In July 2001, angered by France's perceived support for the U.S. "smart sanctions" plan, Iraq announced that it would no longer give French companies priority in awarding oil contracts, and would reconsider existing contracts as well. Iraq also announced that it was inclined to favor Russia, which has been supporting Iraq at the U.N. Security Council, on awarding rights to Majnoon and another large southern oil field, Bin Umar. As of February 2003, Russian company Zarubezhneft reportedly was negotiating a contract to develop Bin Umar. The status of TotalFinaElf, which had previously expressed interest in the field, was not clear. In February 2003, TotalFinaElf's chief executive, Thierry Desmarest, said "We will fight in order to have the best chances for participating in the reconstruction of the country's oil industry."
The 2.5-5 billion-barrel Halfaya project is the final large field development in southern Iraq. Several companies (BHP, CNPC, Agip) reportedly have shown interest in Halfaya, which ultimately could yield 200,000-300,000 bbl/d in output at a possible cost of $2 billion.
Smaller fields with under 2 billion barrels in reserves also are receiving interest from foreign oil companies. These fields include Nasiriya (Eni, Repsol), Tuba (ONGC, Sonatrach, Pertamina), Ratawi (Shell, Petronas, CanOxy), Gharaf (Mashinoimport, Rosneftegasexport), Amara (PetroVietnam), Noor (Syria), and more. Italy's Eni and Spain's Repsol appear to be strong possibilities to develop Nassiriya.>>>>>more... |
