Even more than Iran, Iraq remains the largest relatively underdeveloped oil (and gas) frontier in the Middle East. No wonder then that he has been and remains at the center of an ongoing power struggle between the United States and its allies on one side and China and Russia (via Iran) on the one hand. ‘other. In all these clashes in the Middle East, involving Iraq and Iran in particular, France liked to see itself in the role of the “honest broker”, not particularly aligned on one side or the other, like the notably demonstrated his attempts to stop the American invasion. Iraq in 2003 and then prevent the United States from unilaterally withdrawing from the Joint Comprehensive Plan of Action (“nuclear deal”) with Iran in 2018. Under these conditions, it is not surprising that France’s flagship energy company, TotalEnergies, has secured a deal with Iraq to advance four major projects across the country, all linked to its enormous oil and gas resources.
Basically, the price for France is exceptional. Officially, Iraq holds a very conservative estimate of 145 billion barrels of proven crude oil reserves (17% of the Middle East total, around 8% of world reserves, and the fifth largest on the planet), closer of 132,000 billion cubic feet of natural gas water (the 12e largest in the world), according to figures from the Energy Information Administration (EIA). Unofficially, the numbers are likely to be much higher.
The Iraqi Oil Ministry has repeatedly stated that the country’s undiscovered resources stand at around 215 billion barrels and this was also a figure that was obtained in a detailed 1997 study by the respected oil and gas company. Petrolog. Even that figure, however, did not include parts of northern Iraq in the semi-autonomous region of Kurdistan, administered by the KRG. Before the recent increase in exploration activity in the KRG region, more than half of exploration wells in Iraq had been drilled before 1962, a time when technical limitations and low oil prices made it very clear. more stringent of a commercially successful well than would be the case today. Based on the previous limited exploration and development of oil fields in the KRG region, the proven oil reserves figure was first estimated at around 4 billion barrels. This was then increased by the KRG to around 45 billion barrels but, again, this could well be a very conservative estimate.
The main logistical problem in southern Iraq that has prevented crude oil production from progressing to its short-term target of 7 million barrels per day or longer-term targets of 9 million b / d d and even 12 million bpd is the completion of the Common Seawater Supply Project (CSSP), and it is one of four projects now taken over by TotalEnergies. The project involves taking and treating seawater from the Persian Gulf, then transporting it via pipelines to oil production facilities with the aim of maintaining pressure in the oil reservoirs to optimize longevity and field yield. The long overdue plan for the CSSP is that it is used initially to deliver around 6 million barrels per day of water to at least five fields in southern Basra and one in Maysan province, then built for use in d ‘other fields.
The long-standing Kirkuk and Rumaila fields – the former started production in the 1920s and the latter in the 1950s, both having produced about 80 percent of Iraq’s combined oil production – require injection of continuous water, the reservoir pressure in the former having dropped significantly after producing only about 5 percent of the oil-in-place (OIP). Rumaila, meanwhile, had produced more than 25 percent of its OIP before water injection was necessary because its main reservoir formation (at least its southern part) connects to a very large natural aquifer which has helped push the oil out of the reservoir. .
Although the water requirements of most Iraqi oil fields fall between these two cases, the injection requirements of the oil fields are highest in southern Iraq, where water resources are also the least available. . To meet and then maintain Iraq’s future crude oil production targets over any significant period, the country will have total water injection needs equivalent to approximately 2% of the combined average flows of the Tigris and Euphrates, or 6% of their combined flow during the low season. While withdrawals at these levels may appear manageable, these water sources will also need to continue to satisfy other much larger end-use sectors, including agriculture.
Before this contract was last awarded to TotalEnergies, there were still only two companies with a realistic chance of taking over the giant CSSP: the American supermajor ExxonMobil, and its Chinese equivalent, the China National Petroleum Corporation (CNPC). However, it was understood by everyone involved that only the American company had all the technology, equipment and expertise necessary to carry out the entire CSSP on its own, with CNPC being involved for various geopolitical and funding reasons. . In early 2018, however, negotiations between the Iraqi Oil Ministry and ExxonMobil over the CSSP collapsed, leaving the way open for CNPC, but its progress since then is uncertain to say the least. As with so many large oil and gas projects in Iraq, it seems that the real reason ExxonMobil couldn’t continue with the CSSP plan was that the risk / reward matrix was too skewed towards the risk side, in particular the risks arising from the endemic corruption in the country, repeatedly emphasized as the leading cause of project failure in Iraq by Oil chauffage.
Related: Merger Mania Paves The Way For A New Era In America’s Shale
The prospects for TotalEnergies’ second major project of the four – the collection and refining of associated natural gas in the five oil fields in southern Iraq of West Qurna 2, Majnoon, Tuba, Luhais and Ratawi – appear better than for its involvement at any stage. of the CSSP, however. Another separate project aimed at further developing Ratawi is the third of the four major projects entrusted to TotalEnergies.
For starters, there is a clear economic imperative for Iraq as currently this vast resource of associated gas is simply being burned, like money. Instead, it could be easily monetized in gas exports or used to generate electricity in the chronically malnourished Iraqi grid. It would also mean that the precious crude oil would not have to be used to generate electricity and could be exported, further helping to alleviate the severity of the cash shortages Prime Minister Mustafa al-Kadhimi has faced since his arrival. input function. As it stands, Iraq still ranks among the world’s worst offenders for associated gas flaring, after Russia, which burned around 16 billion cubic meters last year, despite joining in 2017. United Nations and the World Bank. initiative to end this type of routine gas flaring by 2030.
The associated gas project is expected to produce at least 300 million standard cubic feet of gas per day and double after the second phase of development. The agreement between Iraq and TotalEnergies follows the signing of a memorandum of understanding on January 27 to develop various large-scale projects, including gas developments associated with Ratawi in the south, Diyala in the east and Anbar in the south. northeast. TotalEnergies already has continuous experience in Iraq, with a 22.5% stake in the Halfaya oil field in the southern Missan province and an 18% stake in the Sarsang exploration block in the semi-autonomous region. from Kurdistan to the north.
Successfully capturing the associated gas rather than the flare will also allow Iraq to relaunch the US $ 11 billion Nebras petrochemical project with Shell, which, if carried out in a correct linear fashion, could be completed in five years and generate estimated profits of up to $ 100 billion for Iraq over its initial 35-year contract period . This theoretically greener approach to its energy resources is also found in the last of the four projects undertaken by the French company, which will be the construction and operation of a 1000 megawatt solar power plant.
By Simon Watkins for Oil chauffage
More most popular reads on Oil Octobers: