THE Iraqi Oil Thread pt 2 (merged)

[OilFinder2]

Hmmm, we have an The Iraq chaos thread and a Iraq Civil War Thread but no Iraq Oil Thread.

Or maybe we do, but I'm not finding it. The "Iraq reserves>Saudi Arabia" one.

Here:
http://peakoil.com/current-events/iraq- ... 95-90.html

I doubt Kurdistan all by itself would ever be another Saudi Arabia, but Iraq as a whole certainly could be.

[The_Virginian]

Aw heck stu.

We love it when they fight each other.

devide and conqueor...

[lateStarter]

http://seekingalpha.com/instablog/418684-utualpha/9877-is-iraqi-kurdistan-the-next-saudi-arabia

The Kurdistan region of Iraq is a geological extension of the world’s richest petroleum fairway, which extends from Saudi Arabia to Syria. It is estimated to have around 45 billion barrels of oil reserves making it sixth largest in the world, mostly recently discovered (even excluding Kirkuk and Mosul which are essentially controlled by the federal government). Due to geo-political conflicts, the resources in Kurdistan have been essentially untapped. Upon the overthrow of Saddam Hussein’s regime in Iraq, however, Kurdistan began to open itself to foreign investment (the tapping of the Kurdistan keg). Currently about 25 companies have been granted the Profits Sharing Contracts (PSC) from the Kurdistan Regional Government (KRG). Some of the publicly traded companies are listed below.

What is the point of your post? Are you looking for justification/sympathy because you bought that 65" flat screen for your bathroom?

[killJOY]

For the point of view of realpolitik, the US occupation of Iraq is a stunning achievement.

It's immoral, illegal, insane, but the US now has a rosier future in the post peak world.

It will be interesting to see what all the "transition/powerdown" people in the US do once the Iraqi flows increase and start filling in where Cantarell is leaving off. Will these people "swear off" consuming such Iraqi oil out of a superiority complex?

I sure hope so, as this will reduce demand, cause prices to drop, and allow me to fuel up my tractor more cheaply.

[pstarr]

For the point of view of realpolitik, the US occupation of Iraq is a stunning achievement.

It's immoral, illegal, insane, but the US now has a rosier future in the post peak world.

It will be interesting to see what all the "transition/powerdown" people in the US do once the Iraqi flows increase and start filling in where Cantarell is leaving off. Will these people "swear off" consuming such Iraqi oil out of a superiority complex?

I sure hope so, as this will reduce demand, cause prices to drop, and allow me to fuel up my tractor more cheaply.

I like you. You are a funny smart wise-ass.

[Schmuto]

Geez wizz, Wally, it would be quite a shock if it turns out that Iraq/Kurdistan actually IS the golden fleece of remaining oil stock in the world.

Stroke of luck, we're already there mate!

[dorlomin]

200 died in violence last week. The funding for the Iraq Awakening groups is being withdrawn......


I'd count on a big upsurge in oil production soon. Not unless al Malaki has a rabbit in his hat.

[mos6507]

But the thing is, despite the popular opinion that iraq was on overt resource grab, not all of the iraqi oil will be bound directly for the US. So yes, it will increase the global production of oil vs. the Saddam era but I'm not sure how much of it will be guaranteed to get to us.

[eastbay]

But the thing is, despite the popular opinion that iraq was on overt resource grab, not all of the iraqi oil will be bound directly for the US. So yes, it will increase the global production of oil vs. the Saddam era but I'm not sure how much of it will be guaranteed to get to us.

Are you certain about that? I'm not convinced of that at all.

[vaseline2008]

May be a while yet....

Iraqi Oil Licensing Auctions Hit Trouble

[Starvid]

I don't really see what the big integrateds like Exxon have to offer Iraq, unless Iraq immediately want to launch massive programs to increase production a lot.

They'd be better off with a national company supported by Schlumberger, Halliburton and the likes. And I say this as an Exxon shareholder.

[Graeme]

Iraqi oil licensing round runs into trouble

Iraq's hopes for an oil-revenue fueled postwar recovery suffered a sharp blow Tuesday as the foreign oil companies it counted on to help develop its vast reserves greeted the country's first oil auction in over 30 years with grumbles and just one deal.

Two consortiums, headed by British giant BP and Exxon Mobil, submitted offers for the Rumaila oil field — the largest prize on offer with 17.8 billion barrels in crude reserves.

The Exxon Mobil-led consortium, which included Malaysia's Petronas, requested $4.80 per barrel for production over the minimum, while BP wanted $3.99 per barrel. The ministry was willing to pay $2 per barrel.

BP agreed to match the ministry's price and won the contract for Rumaila.

yahoo

[Ferretlover]

Iraqi oil licensing round runs into trouble By SINAN SALAHEDDIN Associated Press Writer © 2009 The Associated Press, June 30, 2009, 11:56AM:
BAGHDAD — Iraq's hopes for an oil-revenue fueled postwar recovery suffered a sharp blow Tuesday as the foreign oil companies it counted on to help develop its vast reserves greeted the country's first oil auction in over 30 years with grumbles and just one deal.
Roughly a year in the making, the foreign licensing round was touted by Oil Minister Hussain al-Shahristani as a key step to boosting Iraq's oil output to 4 million barrels per day and raking in cash the government desperately needs after years of sanctions and the U.S.-led invasion in 2003 left its economy in shambles. …

Under the 20-year service contracts on offer, the companies would be paid a per barrel fee for any crude they produce in excess of a minimum production target. But the price requested by all the companies was at least twice as high — and in a couple of cases almost 10 times higher_ than what the oil ministry was willing to pay.
Two oil executives from different companies at the auction complained that Iraq was offering too little money given the prevailing security risks and political uncertainty. They also complained that they were not given enough time to revise their bids — sometimes as little as 15 to 30 minutes. Both spoke on condition of anonymity because of the sensitivity of the issue. …
AP

[energyhoggin]

well to put it into perspective Texas has over one million oil wells Iraq has little over two thousand oil wells, Russia's total oil reserves is around 60 to 70 billion barrels and they are producing 9.2 million a day, Iraqs total oil reserves is around 115 billion barrels and they are only producing 2.4 million barrels a day, so i guess it all depends on the infrastructure and ability to extract the oil from the substrate, so they have a long way to go ide say about 8 to 10 years to max production and that is going at it full steam ahead

[gnm]

NPR yesterday morning..... Following a discussion about withdrawing from Iraq they made the statement that "with western investment and technology" Iraq could increase its production fourfold from 2.5 mbpd to 10 mbpd.

That damn irresponsible reporting. I wonder where the hell they got those numbers? I've never seen any reasonable assessment of Iraq being anywhere near that much less being able to produce as much as Saudi Arabia.

Idiots.

-G

[TheDude]

Hat tip to memmel for posting this in another thread, but the juicy meat is on page 2 which he didn't quote:

Iraq oil auction dashes majors' bonanza hopes | Reuters

The failure of even Chinese oil companies -- typically the biggest payers in auctions for energy assets -- to meet Iraq's demands is not a good omen for future bid rounds, IHS Global Insight Middle East Energy analyst Samuel Ciszuk told Reuters.

Part of the reason for the chasm on value perceptions may be related to reservoir damage, Ciszuk said.

After viewing data on the fields in recent months, foreign companies may have concluded the damage, due to underinvestment in recent years, is greater even than Baghdad realizes, and so that the two sides have varying perceptions on the risks attached to meeting the production targets in the contracts.

This is of crucial importance; this ruinous policy has been going on for almost two decades now, and will severely impact URR of these fields. Recently I came across another piece saying they were still injecting resid; here is one from 2005:

Derelict Plants Are Crippling Iraq's Petroleum Industry (NYT)

If the gas is not going to be used to create petroleum products, Mr. Braudaway said, it would normally be reinjected to keep the pressure up as oil is extracted, insuring a longer life for the wells. But Iraq does not do that either. Instead, in the south, which has 80 percent of the country's oil reserves, it uses an antiquated system of water injection to keep the pressure up. (The problems are even worse in the north, where for reasons known only to themselves, Iraqi engineers pumped things like excess fuel oil, refinery residues and old crude oil into some wells, probably damaging them permanently.)

This has been going on since at least 1992: IRAQ - The Main Fields In The North. - Free Online Library

Since 1992, NOC has been re-injecting fuel oil into the Baba and Avanah domes. In 1990 it had a total of 269 wells, including 71 production wells.

An excellent blog: Iraqi Reservoir Damage May Be Long-Lasting

By Ruba Husari

(Published in International Oil Daily Sept. 28, 2004)

Iraq’s leading oil field, Kirkuk, may have suffered irreparable damage to its reservoir as a result of the reinjection of fuel oil, refinery residue and gas-stripped oil over the last 15 years, according to Iraqi industry sources.

The reinjected products amount to some 1.5 billion barrels, according to one estimate.

The process, which was widespread under the former regime of Saddam Hussein, is still continuing, as Iraq struggles to balance its product needs. In general, crude production since the end of last year’s war has continued in the same manner as before, with little sub-surface maintenance.

While under UN sanctions from 1990 to 2003, Iraq for years reinjected excess fuel oil into the Kirkuk field, to deal with excess products that it failed to export, legally or otherwise. Baghdad was allowed to export crude from 1996 under the UN supervised oil-for-food program, under strict supervision by UN monitors.

Petroleum engineers and analysts say the reinjection of so much fuel oil and crude could complicate the Kirkuk field’s reservoir study. “Kirkuk is already a carbonated field and reinjecting fluids that are not original fluids to the field could modify the reservoir structure,” said one engineer.

In a worst-case scenario, the use of additives could change the “wettability” of the field, creating oil-wet rocks instead of water-wet ones. That kind of damage is usually irreparable, experts say.

The injection of fuel oil has definitely increased viscosity, making crude flows harder, sources say. One remedy to this problem involves using gas lift and installing gas pumps in the subsurface facilities.

“It all depends on where in the field the injection took place, how big the area concerned is, and whether it was done at a limited number of wells and which ones,” said another petroleum engineer.

[dorlomin]

Extreamly infromative there.

So many lives for that.

[dorlomin]

Why has no one done a proper audit on Iraqi reserves since the invasion? They are playing the same OPEC reserve numbers game as everyone else.

[rockdoc123]

As someone who had the opportunity to review a couple of the fields on offer back in the oil for food campaign after Gulf War I, I'd like to point out that the rumors of extensive reservoir damage are just that, rumors.
Note that the bids in the round were two part....1. bid a dollar per bbl value that the contractor would like to walk away with on the incremental bbls and 2. what the increase in production or # incremental bbls is. I've seen the bids and in most cases the IOC's bid higher incremental production uptick than the Iraqi's were expecting but also higher dollar per bbl value. This suggests that the IOC's were not at all concerned about being able to "fix" the issues with the various fields.
From what I have seen the real issue with the Iraq fields is anisotropy. Most of the reservoir units are not ubiquitous in quality across the big fields. As an example in Kirkuk the really great Eocene-Miocene reefal reservoirs are only present in part of the field. The same can be said for East Baghdad and Rumaila.
Why were the blocks not awarded....simply because the IOC's feel that they can't make any money at the $2/bbl uptick the Iraqis are setting as a limit. Operating costs here are going to be absolutely horrendous, much of those costs associated with setting up appropriate security. Note that CNPC and it's partners bid $7 uptick for Kirkuk which speaks directly to the huge risk premium they see as being necessary.
My back of the envelope calculation suggests BP is going to at best breakeven on this venture. They possibly see this as a "foot in the door" approach. Note that for the very big IOC's they are driven to some extent not just by return on investment but also by reserve replacement. A company the size of BP needs huge additions in reserves each year just to offset production....not easy to come by in the world these days. Hence if they are driven by reserve replacement they might be willing to accept very crappy return on investment. It's all about the metrics that drive share prices.

[TheDude]

Thanks for the input, rock. Do you think the IOCs might be playing up these rumors to up the ante a little? Also the links I provide show that these bad reservoir practices continue to this day, so this isn't peculiar to the Hussein days.

A very intriguing article on that blog I linked to is an interview with Jabbar Al-Luaibi, former head of SOC. His description of all the headaches and wrangling to keep production up fits a description I read recently about the goings on in Iraq, "holding things together with duct tape and rubber bands." Lots info here about field operations you'll take an interest in I'm sure.