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Kurdistan’s Huge Oil Reserves Lend Credibility to Iraqi Claims of 115 Billion Barrels
January 13th, 2012 |
| Whilst much of Iraq may be viewed as in a metastable social and political state, the semi-autonomous northern region of Kurdistan has enjoyed relative peace for a number of years. This has enabled the regional government to develop oil exploitation laws and to lease much of the land to foreign exploration and production companies.
Regional operator Gulf Keystone Petroleum has been involved in the discovery of the Shaikan Field, believed to hold between 8 and 13.4 billion barrels in place with appraisal of this giant (potential supergiant) on-going. Gulf Keystone Petroleum believes that Iraqi Kurdistan may hold 45 billion barrels of oil reserves (recoverable?) lending some credibility to Iraqi claims of 115 billion barrels reserves for the whole country. This compares with a total of 53 billion barrels of oil produced from the North Sea up to the end of 2010.
Disclaimer The author has recently purchased stock in Gulf Keystone Petroleum and Petroceltic whose company presentational materials provide the backbone of this post. Readers need to be aware that information contained in corporate presentations is not necessarily reliable, although companies listed on the London Stock Exchange are regulated and need to be cautious about what they say. For example, Gulf Keystone’s reports on reserves on the Shaikan Field have been audited independently by oil and gas field auditors Ryder Scott and Dynamic Global Advisors. During a recent review of the activities of small oil companies listed on the London Stock Exchange, I came across some interesting presentations on the oil exploration activity and potential of Kurdistan in northern Iraq. Everyone will know that Iraq has been in a state of unrest since the US led invasion of 2003 that has just recently come to an end. But in the North, the semi autonomous region of Kurdistan has been much more peaceful. Elections were held in 2005 and again, four years later, in 2009. The Kurdistan Regional Government has proceeded to divide the territory into license blocks, many of which have subsequently been leased to foreign oil exploration companies (Figure 1). The oil rights of the Kurdistan semi-autonomous region have not been recognised by the Iraqi government and operating in this area therefore carries significant political risk. Most of the blocks have been leased to small companies and until recently the oil majors have been shy of taking risks in Kurdistan that may compromise their relationship with the Iraqi government. Geological setting Kurdistan forms part of the Zagros Fold Belt that is a prolific oil province in Iran and Iraq to the south and west (Figure 2).
The reservoirs are of Triassic and Jurassic age and are deposited along the margin of the paleo Tethys Ocean, which closed owing to large scale plate tectonic movements during the Cretaceous and Tertiary, giving rise to the Alpine – Himalayan mountain belt. In the Zagros Fold belt, the deformation of strata is less severe and is characterised by gentle synclines and anticlines. Source rocks are depressed and warmed in the synclines and the oil formed may migrate up-dip to be trapped in the adjacent anticlines (Figures 3, 4 and 5).
Exploration history An interesting slide from Irish independent minnow Petroceltic shows the exploration status in 2007 and 2011 (Figure 6). During the Saddam era, it appears that exploring for oil in Kurdish areas did not take place at all. The Kurdistan semi-autonomous region therefore represents virgin territory bang slap in the middle of one of the most prospective oil exploration territories on Earth. Licensing and drilling has only taken off since 2007 and activity is moving at an amazing pace with several major discoveries already made. ExxonMobil was the first super-major oil company to accept the political risk with the award of 6 blocks in 2011. A total of 6 blocks remain unlicensed.
Oil export options Getting the oil out of this landlocked territory surrounded by countries with unstable tendencies presents a major challenge. There is an existing pipeline route called the Kirkuk – Ceyhan pipeline that exports oil through Turkey to the Mediterranean coast (Figure 7). This pipeline crosses the Iraq – Turkey border within Kurd held territory giving them some control over access. There are in fact two pipelines with combined capacity of 1.6 mmbpd which have been the subject of repeated sabotage attacks. They are clearly exposed and difficult to guard (Figure 8). This export route is reported to currently carry around 0.5 mmbpd. There will be competition for access and ownership rights between Kurdistan and Iraq.
A very recent development (14 Nov 2011) is the announcement that Vallares PLC, established by Nathaniel Rothschild and headed up by ex BP CEO Tony Hayward will merge with Genel Enerji AS and plan to build a new 400,000 bpd pipeline across Turkey to the Mediterranean. Both Genel and Vallares hold acreage in Kurdistan. Concluding thoughts While it is the early days, given the exploration success so far and the world class pedigree of this petroleum system, the estimate of 45 billion barrels reserves made by Gulf Keystone Petroleum does not seem unreasonable. It is reasonable to speculate that given peace, Kurdistan may export between 2 and 4 million barrels of oil per day within the next decade. With a population of 4 million, Kurdistan could expect to become wealthy like Norway and the Gulf emirates. That is if restless neighbours permit this to happen. There are a growing number of new, very large, more or less conventional oil plays being discovered that include the sub-salt off Brazil, the Aldous Major – Avaldsnes field in Norway and most recently the news that sub-salt oil has been discovered by Maersk Oil in their first well off Angola. Combined, these vast discoveries promise to make the decline on the downside of Hubbert’s peak a much more gradual affair, for a while at least. By. Euan Mearns |
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Iraq sets January 2012 for its 4th energy auction
January 13th, 2012 |
The January auction will be Iraq’s fourth bidding round on its energy assets since the overthrow of Saddam Hussein in 2003. The country’s oil and gas sector is struggling to overcome years of neglect and violence by seeking international investment to exploit its below-ground riches.
Oil Minister Abdul-Karim Elaibi told a news conference in Baghdad that interested companies have until May 19 to prequalify to compete for the 12 blocs. No exact date for the bidding was given.
“We hope that the next bidding round will achieve good results and bigger success than the ones before,” said Abdul-Mahdi al-Ameedi, general director of the oil ministry’s licensing and contracts department.
Iraqi oil officials said the companies will be paid a flat fee for their services rather than a share in the discovered resources. The officials declined to be identified because they were not authorized to brief the media.
Iraq has awarded 15 oil and gas deals since 2008 to international energy companies in the first major investment in the country’s energy industry in more than three decades.
Seven of the exploration blocs are gas and the others are oil fields. Five of the blocs are in Iraq’s western Anbar province or shared between Anbar and neighboring provinces; one is in the northern Ninevah province; one is shared between central Diyala province and neighboring Wasit province while the rest are scattered throughout southern Iraq.
The Iraqi oil minister also reiterated his belief that $120 per barrel is an acceptable price for oil and would not affect the global economy.
Elaibi first made the comments back in March when oil was hovering around $102 a barrel. Since then oil prices have climbed to almost $113 a barrel as fighting in Libya has shut down almost all the OPEC member’s oil output. The jump in oil prices has been a boon for Iraq, also an OPEC member. Baghdad is almost entirely dependent on the price of oil for revenue and rebuilding its war-damaged economy.
The blocs that will be on offer in January are expected to add about 29 trillion cubic feet of natural gas to the current 126.7 trillion cubic feet in reserves, and about 10 billion barrels of oil to the current 143.1 billion barrels of oil.
Iraq plans to increase daily oil production to 6.5 million barrels by 2014 compared to its current production of 2.75 million barrels per day. Output is projected to climb to 3.3 million barrels per day in 2012 and 4.5 million barrels per day in 2013.
Iraq to Call for Major Investment in Refineries
January 13th, 2012 |
Dr Ahmed al Shamma, Deputy Minister of Oil, to launch massive investment in refineries at the Iraq Mining conference on 7-8 September 2011. Dr al Shamma will present:
◦A review of present refineries and operating capacities and details of major projects to rehabilitate and upgrade these refineries.
◦A review of planned grass roots refineries to cater for domestic demand in the next two decades.
◦A review of the main features of law 64 2007 and its amendment as regards to investment in refineries.
A recent Reuters report noted that Iraq is set to import 950,000 tonnes of gasoline and gas oil in the fourth quarter. Dr Al Shamma will reveal the Ministry’s plans for welcoming international investment in refineries to turn Iraq into an exporter of refined oil products.
Minister of Construction to reveal massive infrastructure programmes
Minister for Construction and Housing, Mr Muhammad al Darraji, will reveal major projects with excellent incentives for international investment in infrastructure.
◦Iraq Ministry will act as guarantor for international investment in infrastructure.
◦Huge incentives are to be revealed at the conference for investment in highways, bridges and housing.
◦A detailed overview of the Ministry’s strategy for generating foreign investment in the housing and construction sectors will be revealed.
Iraq Mining 2011 is the significant conference to take place on the redevelopment of industries in Iraq. Distinguished Iraqi delegates and decision-makers headed by the Deputy Prime Minister for Economical and Industrial Affairs, Dr Rouzh Nouri Shawis, will participate.
To register for Iraq Mining 2011, being held at the Royal Garden Hotel, London, 7 – 8 September, please visit www.iraqmining.com to register. Organisations interested in exhibiting should email info@iraqmining.com or call +44 (0) 207 559 1412
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January 5th, 2012 |
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UMW in $30m Deal at Garraf Oilfield
December 29th, 2011 |
Malaysia’s Synergistic Generation Sdn Bhd (SGSB), which is 60 percent owned by UMW Holdings Bhd, has entered into a $30 million contract with Petronas Carigali Iraq Holding BV (PCIHBV).
The contract is for the procurement of materials and equipment and installation and commissioning of all equipment and facilities by SGSB for the setting up of the Garraf Power Plant Phase I at the Garraf oilfield.
(Source: Bernama)
Iraq Seeks New Supplies For Growing Power Needs
December 29th, 2011 |
The Iraqi State Oil Marketing Organization has launched a tender to buy 3,400 tons of gasoil per day for 12 months to power electricity generators.
In July 2011, Iraq signed a one-year deal with Iran to receive approximately 1,300 tons per day of gasoil to help power the growing needs of a country already short on fuel.
Over the past eight years, the finance ministry has tried to alleviate the problem with $27bn of disbursements. Power supply has roughly doubled since 2006 from 4,000 MW to between 7,000 MW and 8,000 MW, but demand has also grown due to Iraq’s strengthening prospects, from around 8,000 MW to 14,000 MW.
When there are no power failures, Iraqis gets electricity for roughly two-thirds of the day, on average. Mortality in Iraq is still high during the hot summers due to power shortages and failures.
(Sources: Reuters; AKNews)
Iraq to build four new oil refineries
December 15th, 2011 |
Iraqi officials praised the Ministry of Oil’s newly signed contracts for the construction of four new refineries.
The ministry signed a contract with the International United Faust Waller company on Tuesday (November 8th) to build four refineries in the cities of Nasiriyah (output capacity of 300,000 barrels per day (bpd)), Amara (150,000 bpd), Kirkuk (150,000 bpd) and Karbala (140,000 bpd).
“These refineries will definitely meet the daily consumption of oil products in the country and after they start operating will nullify the need for imports from neighbouring countries,” said Oil Ministry spokesman Assem Jihad.
According to the contracts, the company should present the final designs for the four refineries by the first of January 2012 at the latest so work on building the foundations can begin.
“The new refineries will be constructed according to the latest international specifications and will reinforce the production capacity of Iraq of various oil products, in addition to providing employment for Iraqi capacities and manpower.”
Hameed Allawi al-Tarf, ministry adviser for production affairs, told Mawtani that work on the new refineries will go on for two and a half years. The company will be responsible for bringing in engineers and experts, while the daily labour will be performed by Iraqis.
Tarf said he expects each refinery will employ more than 2,500 permanent workers, and could possible increase the stated production capacity.
“The expected declared production of the refineries will be their normal capacity, not the maximum output, and surely this number can be increased when there is a need for it.”
Iraq’s oil policy
Hussein al-Shaherstani, deputy prime minister for energy affairs, said, “The Iraqi government’s oil policy is moving on with solid steps and progressing fast — better than the other countries of the region.”
“Iraq will very soon become an oil producing and exporting country that all countries of the world will look up to it. Iraq’s economic power will be the best weapon with which to confront the coming challenges,” he told Mawtani.
Al-Shaherstani said Iraq plans to set up refineries in all Iraqi provinces to meet the provinces’ needs for kerosene, gasoline, gasoil, household cooking gas, and auto engine oil.
He also asserted that Iraq will reach its highest oil production level of 12 million bpd by 2016.
Khalid Abdullah, a member of the Iraqi parliament oil and gas committee, said, “The four new refineries will allow Iraq to overcome its daily problems of poor supplies, and the low quality of the imported fuels, as well as the delays encountered in deliveries, in addition to absorbing a large number of experts and manpower.”
“This is a great project. I might even say that the first seeds of security improvements have sprouted as the international companies started to come to Iraq investing billions of dollars in total trust and security.”
Shell Signs $17bn Iraqi Gas Deal
December 15th, 2011 |
Shell, Mitsubishi and the Iraqi government have finally signed the $17.2 billion deal on Sunday to capture flared gas at Iraq’s southern oilfields.
The 25-year project is intended to boost production of badly needed electricity and reduce the environmental damage caused by flaring, as well as opening up the possibility of gas exports.
It will harness more than 700 million cubic feet per day of gas from the oilfields of Rumaila, Zubair and West Qurna, increasing eventually to 2 billion cubic feet per day.
The goal of 2 billion cubic feet per day capacity is linked to peak production at the southern fields, which is expected by 2017, Deputy Oil Minister Ahmed al-Shamma told Reuters.
“This day represents a historic change in the Iraqi oil industry … the best utilisation of (associated) gas to meet the increasing needs for gas in Iraq,” Luaibi said at a signing ceremony attended by Shell Chief Executive Peter Voser.
The Shell deal will involve the creation of the Basra Gas Company joint venture, in which the government will hold 51 percent, Shell 44 percent and Mitsubishi 5 percent.
Existing facilities are currently handling 370 million cubic feet of gas per day from seven southern fields.
The project may include the construction of an LNG export facility with a maximum capacity of 600 million cubic feet per day. Exports are possible once Iraq’s domestic needs are met.
Officials say the project requires investment of $17.2 billion — $12.8 billion to rehabilitate existing facilities and build new ones, and $4.4 billion for the LNG export unit.
The Shell-Mitsubishi partnership expects an internal rate of return on the project of 15 percent on an initial investment of $6.98 billion, while SGC plans to put in $3.7 billion of public funds initially and fund the rest through gas sales.
(Sources: Reuters, Wall Street Journal)
Gulf Keystone Updates on Operations and Sales
December 15th, 2011 |
Gulf Keystone (GKP) today provided an update on its ongoing exploration and appraisal programme in the Kurdistan Region of Iraq, which includes the Shaikan block, a major discovery with independently audited gross oil-in-place volumes of between 8 billion barrels to 13.4 billion barrels calculated on the P90 to P10 basis with a mean value of 10.5 billion barrels.
Shaikan-4 Appraisal Well
Gulf Keystone has completed drilling of the Shaikan-4 appraisal well, 6 km to the west of the Shaikan-1 discovery well, to a total depth (TD) of 3,387 metres in the middle Triassic with 2,375 metres of total gross pay interval. The well has been drilled through the Jurassic (Sargelu, Alan, Mus and Butmah formations) and the upper and middle Triassic (Baluti, Kurre Chine A and Kurre Chine B formations) with an indication of potential new Jurassic reservoirs in Sargelu sands and Barsarin carbonates.
The Company is now embarking on a well testing programme for Shaikan-4 which will target several formations in the Jurassic and Triassic, including the Chia Gara/Barsarin, Sargelu, Butmah, Kurre Chine-A, Kurre-Chine-B and Kurre Chine-C formations.
Preliminary results from Shaikan-4 formed part of the new data used by Dynamic Global Advisors (DGA), independent Houston-based exploration consultants, to calculate the most recent significant upgrade of the gross oil-in-place volumes for the Shaikan discovery announced in November 2011.
Shaikan-5 Appraisal Well
The Shaikan-5 appraisal well, 6 km to the north-east of the Shaikan-2 appraisal well, has drilled to a measured depth of 856 metres and 20″ casing is currently being set. The well will then continue drilling to the estimated TD of 3,500 metres subject to technical conditions.
Shaikan-6 Appraisal Well
The move of the WDI 842 rig to the location of the Shaikan-6 appraisal well is ongoing. The well, which will be drilled 9 km to the east of the Shaikan-2 appraisal well, is due to spud in December 2011. Estimated TD for Shaikan-6 is 3,800 metres subject to technical conditions.
Shaikan oil sales
Gulf Keystone has recommenced sales of the Shaikan crude to the domestic market of the Kurdistan Region of Iraq at a rate of about 1,500-2,000 barrels of oil per day. This initial rate for the crude produced at the Shaikan-1 & 3 Extended Well Test (EWT) facilities has been set to meet current domestic oil sales specifications. Volumes of oil production and sales, both into the domestic and export markets, are due to increase significantly after the ongoing upgrade of the Shaikan-1 & 3 EWT facilities has been completed.
Gulf Keystone is the Operator of the Shaikan block with a working interest of 75 per cent and is partnered with Kalegran Ltd. (a 100 per cent subsidiary of MOL Hungarian Oil and Gas Plc.) and Texas Keystone Inc., which have working interests of 20 per cent and 5 per cent respectively.
Ber Bahr-1 Exploration Well
The first exploration well on the Ber Bahr block has drilled to a measured depth of 1,765 metres at the top of the Triassic with hydrocarbons indications observed in the well. Wireline logging is underway which will be followed by running of 9 5/8″ casing. The well will then continue drilling to the estimated TD of 2,100 metres.
Gulf Keystone has a 40 percent working interest in the Ber Bahr block operated by Genel Energy, which holds a 40 percent working interest in the block. The Kurdistan Regional Government has a 20 percent carried interest in the Ber Bahr Production Sharing Contract. The Operator’s resource estimate for the Ber Bahr block is 1.5 billion barrels of oil equivalent-initially-in-place.
The testing programme for Bekhme-1, the second exploration well on the Akri-Bijeel block drilled 20 km to the north-east from the Bijell‑1 discovery well, is ongoing. After the testing programme has been completed in December, the Operator will issue an appropriate announcement.
Gulf Keystone has a 20 percent working interest in the Akri-Bijeel block operated by Kalegran Ltd., 100% subsidiary of MOL Hungarian Oil and Gas Plc., which holds 80 percent working interest in the block. Operator’s P50 resource estimate for the Akri-Bijeel block is 2.4 billion barrels of oil-in-place.
John Gerstenlauer, Gulf Keystone’s Chief Operating Officer commented:
“Following our recently completed tests at the Shaikan-2 appraisal well, we plan to replicate this successful programme at Shaikan-4. Our preliminary results for this well are very promising and we look forward to the Shaikan-4 well testing programme which is yet another step in the process of unlocking the full potential of the giant Shaikan discovery in the Kurdistan Region of Iraq. In this regard, the recommencement of our domestic oil sales is particularly significant as we prepare to upgrade the existing test production facilities and ramp up both domestic sales and oil exports of the Shaikan crude in the first half of 2012.“
ProSep Awarded $6.5m Contracts in Iraq
December 15th, 2011 |
ProSep Inc. (TSX: PRP) has announced that it was awarded three contracts with a new customer operating in Iraq, for the design and supply of a produced water package and water deaeration and fuel gas treatment systems.
Together, these contracts represent a value of $6.5 million. The equipment provided will be installed at the same early production facility located onshore.
“These contracts awarded by a new customer operating in Iraq bring our year-to-date total orders signed to $46 million, almost twice last year’s orders,” said Jacques L. Drouin, President and CEO.
“By investing in expanding our business development and process engineering teams, we’ve broadened our market reach and depth of offering, and expect to continue capturing market share.”
The produced water treatment package and water deaeration and fuel gas treatment systems will be designed as skid-mounted pre-assembled units for ease of field installation. Delivery of these systems is expected to occur by the third quarter of 2012.