Mi Iraq Oil Gas 2013

7/29/2019 Mi Iraq Oil Gas 2013

1/24

The Iraq Oil and GasProjects Market Report 2013

A comprehensive overview o Iraqs upstream oil andgas, downstream refning and petrochemical sectors,

with a particular ocus on the projects market

A MEED Insight report

www.meedinsight.com


2/24

The Iraq Oil & Gas Projects Market 2013 2www.meedinsight.com

Table of contentsTable of contents ............................................................................................................................................. 2List of tables .................................................................................................................................................. 6List of figures ................................................................................................................................................... 91. Preface .................................................................................................................................................. 122. Executive Summary .............................................................................................................................. 133. Introduction ............................................................................................................................................ 16

3.1 Geography and demographics ....................................................................................................... 163.2 Recent history ................................................................................................................................ 183.3 Economy ........................................................................................................................................ 193.4 Government structure .................................................................................................................... 21

3.4.1 Federal government .............................................................................................................. 213.4.2 Government of the Kurdistan region ..................................................................................... 23

3.5 Key challenges for Iraq .................................................................................................................. 243.5.1 The challenge of regionalism ................................................................................................ 243.5.2 2014 parliamentary elections ................................................................................................ 263.5.3 Relations with Iran ................................................................................................................. 273.5.4 Security ................................................................................................................................. 283.5.5 Corruption .............................................................................................................................. 33

4. Overview of the Iraq oil industry ............................................................................................................ 354.1 Brief history of the oil sector ........................................................................................................... 354.2 Oil Industry structure ...................................................................................................................... 37

4.2.1 The Kurdish exception .......................................................................................................... 384.2.2 The status of Kirkuk............................................................................................................... 394.2.3 Oil exports and the State Oil Marketing Organisation ........................................................... 414.2.4 Transparency ........................................................................................................................ 42

4.3 Oil revenues ................................................................................................................................... 434.3.1 Iraqs dependence on oil revenues ....................................................................................... 434.3.2 Restoring control over oil revenues....................................................................................... 444.3.3 Revenue sharing between the KRG and Baghdad ............................................................... 45

4.4 Legal framework ............................................................................................................................. 464.5 The procurement process .............................................................................................................. 48

4.5.1 The challenge for contractors ................................................................................................ 494.6 Logistical obstacles ........................................................................................................................ 51

4.6.1 Drilling rigs ............................................................................................................................. 514.6.2 Customs and equipment ....................................................................................................... 52

4.8 The Iraq National Energy Strategy (INES) ..................................................................................... 544.9 Construction opportunities ............................................................................................................. 574.10 The contractor market .................................................................................................................... 60

4.10.1 Petrofac ................................................................................................................................. 62
http://bom1/userdata/Ashwita.Suvarna/My%20Documents/Access%20Connections/Projects/Kuwait%20Projects%20market/Work%20files/www.meedinsight.comhttp://bom1/userdata/Ashwita.Suvarna/My%20Documents/Access%20Connections/Projects/Kuwait%20Projects%20market/Work%20files/www.meedinsight.comhttp://bom1/userdata/Ashwita.Suvarna/My%20Documents/Access%20Connections/Projects/Kuwait%20Projects%20market/Work%20files/www.meedinsight.com


3/24


4.10.2 Saipem .................................................................................................................................. 634.10.3 Samsung Engineering ........................................................................................................... 644.10.4 Technip .................................................................................................................................. 654.10.5 Chinese contractors .............................................................................................................. 66

5. Upstream Oil & Gas .............................................................................................................................. 675.1 Upstream Oil .................................................................................................................................. 67

5.1.1 Oil reserves ........................................................................................................................... 675.1.2 Oil production ........................................................................................................................ 685.1.3 Regional comparison ............................................................................................................ 71

5.2 Upstream gas ................................................................................................................................. 745.3 Developing Iraqs oil and gas reserves .......................................................................................... 81

5.3.1 Al-Ahdab ................................................................................................................................ 815.4 Bid round one ................................................................................................................................. 82

5.4.1 Controversy over the Rumaila contract ................................................................................. 835.4.2 Progress since bidding round one......................................................................................... 845.4.3 Missan ................................................................................................................................... 845.4.4 Rumaila ................................................................................................................................. 865.4.5 West Qurna-1 ........................................................................................................................ 885.4.6 Zubair .................................................................................................................................... 89

5.5 Bid round two ................................................................................................................................. 905.5.1 Contract terms ....................................................................................................................... 915.5.2

Progress since bidding round two ......................................................................................... 92

5.5.3 Badra ..................................................................................................................................... 925.5.4 Gharraf .................................................................................................................................. 935.5.5 Halfaya .................................................................................................................................. 945.5.6 Majnoon ................................................................................................................................. 965.5.7 Najma and Qayara ................................................................................................................ 975.5.8 West Qurna-2 ........................................................................................................................ 98

5.6 Bid round three ............................................................................................................................. 1005.6.1 Akkaz gas field .................................................................................................................... 1025.6.2 Mansouriya gas field ........................................................................................................... 106

5.7 Bid round four ............................................................................................................................... 1085.7.1 Blocks awarded in round four .............................................................................................. 110

5.8 Future Oil Ministry plans for upstream sector .............................................................................. 1125.8.1 Future production levels ...................................................................................................... 1155.8.2 Pressure to revise contracts ................................................................................................ 120

5.9 Challenges around increased production .................................................................................... 1225.9.1 Southern oil reservoirs ........................................................................................................ 1225.9.2 Water injection ..................................................................................................................... 125

5.10 Upstream oil in the Kurdistan region ............................................................................................ 1295.10.1 Production sharing contracts ............................................................................................... 130


4/24


5.10.2 Tawke .................................................................................................................................. 1315.10.3 Taq Taq ............................................................................................................................... 1325.10.4 Khurmala Dome .................................................................................................................. 1335.10.5 Shaikan ............................................................................................................................... 134

5.11 Kurdish discoveries ...................................................................................................................... 1355.12 Turkish investment in Kurdistans upstream sector ..................................................................... 1385.13 Upstream gas in the Kurdistan region .......................................................................................... 140

5.13.1 Khor Mor and Chemchemaal .............................................................................................. 1405.13.2 Miran West and Miran East fields ....................................................................................... 1425.13.3 Sumail field .......................................................................................................................... 142

6. Midstream Oil & Gas ........................................................................................................................... 1446.1 Pipeline security ........................................................................................................................... 1456.2 Oil pipelines and storage .............................................................................................................. 146

6.2.1 Domestic pipelines and pumping stations ........................................................................... 1466.2.2 Export pipelines ................................................................................................................... 1506.2.3 Storage facilities .................................................................................................................. 151

6.3 Crude oil export terminals ............................................................................................................ 1536.3.1 Al-Basra Oil Terminal .......................................................................................................... 1536.3.2 Khor al-Amaya Oil Terminal ................................................................................................ 1546.3.3 Umm Qasr and Khor al-Zubair ............................................................................................ 154

6.4 Midstream projects ....................................................................................................................... 1556.4.1 Domestic pipeline projects .................................................................................................. 1556.4.2 Export pipeline projects ....................................................................................................... 1586.4.3 Iraq crude oil export expansion project ............................................................................... 1586.4.4 Other expansion plans in the south..................................................................................... 1596.4.5 Refined products import project .......................................................................................... 1606.4.6 Syriaexport pipelines ........................................................................................................... 1626.4.7 Jordan export pipeline ......................................................................................................... 1636.4.8 Storage facility projects ....................................................................................................... 1686.4.9 Pumping station projects ..................................................................................................... 171

6.5 Midstream gas .............................................................................................................................. 1746.5.1 Existing gas pipelines .......................................................................................................... 1746.5.2 Gas export pipeline to Kuwait ............................................................................................. 1766.5.3 Current gas treatment facilities ........................................................................................... 1766.5.4 North Gas Company ........................................................................................................... 1776.5.5 South Gas Company ........................................................................................................... 178

6.6 Midstream gas projects ................................................................................................................ 1806.6.1 Gas processing ................................................................................................................... 1836.6.2 Gas pipeline projects ........................................................................................................... 1866.6.3 South Gas project (Basra Gas Company) .......................................................................... 192


5/24


6.6.4 Further criticisms of the Shell deal ...................................................................................... 1986.6.5 Missan gas projects............................................................................................................. 1996.6.6 Gas export options .............................................................................................................. 199

6.7 Kurdish pipelines .......................................................................................................................... 2006.8 KRG pipeline projects .................................................................................................................. 201

6.8.1 Kurdistan Iraq crude export pipeline ................................................................................... 2016.8.2 Shaikan pipeline .................................................................................................................. 2026.8.3 Kurdistan-Turkey pipeline ................................................................................................... 2036.8.4 Nabucco gas pipeline .......................................................................................................... 204

7. Downstream Oil & Gas ........................................................................................................................ 2077.1 Rising demand for refined products ............................................................................................. 2077.2 The rehabilitation challenge ......................................................................................................... 2107.3 Antiquated design and production................................................................................................ 2117.4 Irregular crude oil supplies ........................................................................................................... 2127.5 Iraqs existing refineries ............................................................................................................... 214

7.5.1 North Refineries Company .................................................................................................. 2157.5.2 Midland Refineries Company .............................................................................................. 2187.5.3 South Refineries Company ................................................................................................. 2207.5.4 Nasiriyah and other smaller refineries................................................................................. 221

7.6 Downstream projects ................................................................................................................... 2227.6.1 Greenfield refinery projects ................................................................................................. 2237.6.2 Nasiriyah Integrated Project ................................................................................................ 2257.6.3 Karbala refinery ................................................................................................................... 2297.6.4 Kirkuk refinery ..................................................................................................................... 2317.6.5 Missan refinery .................................................................................................................... 2337.6.6 Other planned refineries: Ninevah and Mosul ..................................................................... 235

7.7 Benefits and challenges for greenfield refinery projects .............................................................. 2357.7.1 Legal framework for investors ............................................................................................. 2377.7.2 Financial challenges ............................................................................................................ 238

7.8 Brownfield refinery projects .......................................................................................................... 2407.8.1 North refinery expansion ..................................................................................................... 2417.8.2 Daura refinery expansion and rehabilitation ....................................................................... 242

7.9 Petrochemicals ............................................................................................................................. 2467.9.1 Existing facilities .................................................................................................................. 2467.9.2 Petrochemicals projects ...................................................................................................... 249

7.10 Downstream oil in the Kurdistan region ....................................................................................... 2507.10.1 Erbil refinery ........................................................................................................................ 2527.10.2 Bazian refinery .................................................................................................................... 2527.10.3 Other refineries .................................................................................................................... 2537.10.4 Kurdish refinery projects ..................................................................................................... 2537.10.5 Kurdistan petrochemicals .................................................................................................... 254


6/24


List of tables

Table 1: Snapshot of demographics by province .......................................................................................... 17Table 2: Iraq economic indicators, 2002-12 .................................................................................................. 19Table 3: Key indicators 2012......................................................................................................................... 21Table 4: Branches of government ................................................................................................................. 22Table 5: Iraqi government ............................................................................................................................. 23Table 6: Kurdistan Regional Government ..................................................................................................... 24Table 7: Regionalism in Iraq ......................................................................................................................... 25Table 8: Iraqs security forces ....................................................................................................................... 33Table 9: Iraq oil sector historical timeline ...................................................................................................... 35Table 10: Iraq's key NOCs ............................................................................................................................ 40Table 11: Government budget for state-funded oil and gas projects, 2011-14 ($m)*................................... 56 Table 12: Leading contractors in Iraq ........................................................................................................... 61Table 13: Middle East market share for European and South Korean contractors ...................................... 62Table 14: Chinese state-owned EPC firms contract awards ........................................................................ 66Table 15: Iraqs crude oil reserves growth, 1989-2010 ................................................................................. 67Table 16: Distribution of Iraqs oil reserves, 2010 ......................................................................................... 68Table 17: Iraqs major producing oil fields prior to the concession agreements ........................................... 70Table 18: Total gas reserves......................................................................................................................... 77Table 19: Iraqs proven gas reserves ............................................................................................................ 77Table 20: Al-Ahdab field contractual commitments ...................................................................................... 82Table 21: Licensing round one ...................................................................................................................... 83Table 22: Missan field projects...................................................................................................................... 85Table 23: BP/CNPC Rumaila field contractual commitments ....................................................................... 87Table 24: Licensing round two ...................................................................................................................... 90Table 25: Summary of licensing rounds one and two ................................................................................... 91Table 26: Planned wells ................................................................................................................................ 92Table 27: Badra field projects ....................................................................................................................... 93Table 28: Gharraf field projects ..................................................................................................................... 94Table 29: Petrochina second-phase development EPC tenders .................................................................. 95Table 30: Lukoils major EPC projects in Iraq ............................................................................................. 100Table 31: Gas fields signed under the third licensing round ....................................................................... 101Table 32: Gas fields signed under the third licensing round ....................................................................... 102Table 33: Akkaz contractual commitments and timeline ............................................................................. 103Table 34: Mansouriyah contractual commitments and timeline .................................................................. 107Table 35: Siba contractual commitments and timeline ............................................................................... 107

Table 36: Exploration block sizes and prospects ........................................................................................ 109Table 37: Oil and gas prospects ................................................................................................................. 110Table 38: Iraqs fourth licensing round summary ........................................................................................ 112Table 39: State-funded field developments, 2011-14 ................................................................................. 114Table 40: Iraqs budgeted oil production for 2012 ...................................................................................... 117Table 41: Government oil price assumptions, 2010-14 .............................................................................. 117Table 42: Southern oil field reserves and production ................................................................................. 124Table 43: KRG oil field production .............................................................................................................. 130Table 44: Selected Kurdistan region discoveries ........................................................................................ 137Table 45: Iraqs current pipeline network .................................................................................................... 145Table 46: Selected existing major pipelines................................................................................................ 147Table 47: Summary of Iraqs current southern pipeline network ................................................................ 148Table 48: Existing oil export pipelines ......................................................................................................... 151


7/24


Table 49: Iraq pipeline projects, 2011-14 .................................................................................................... 156Table 50: Planned pipelines ........................................................................................................................ 157Table 51: International oil company pipelines ............................................................................................. 157Table 52: Pipelines currently under construction ........................................................................................ 157Table 53: Government crude export pipeline budget, 2011-14 ($m) .......................................................... 158Table 54: Iraq southern oil export terminal capacity expansion projects .................................................... 160Table 55: Iraq-Jordan export pipeline infrastructure project ....................................................................... 165Table 56: Parties to the BOOT project ....................................................................................................... 166Table 57: Iraq crude oil storage capacity .................................................................................................... 168Table 58: Iraq tank farm projects ................................................................................................................ 169Table 59: Selected pipeline and pumping station projects ......................................................................... 171Table 60: Government pumping station budgeted rehabilitation projects, 2011-14 ................................... 171Table 61: Iraqs crude oil and product pipelines ......................................................................................... 173Table 62: Iraqs gas pipeline network ......................................................................................................... 175Table 63: Selected existing gas pipelines ................................................................................................... 176Table 64: Iraqs main gas processing plants ............................................................................................... 177Table 65: North Gas Company degassing stations .................................................................................... 178Table 66: South Gas Company degassing and compressor stations ......................................................... 179Table 67: Planned processing plants .......................................................................................................... 184Table 68: Gas pipeline projects, 2011-14 ................................................................................................... 188Table 69: Government gas feedstock pipeline budget, 2005-14 ($m) ........................................................ 188Table 70: Planned gas pipelines and processing plants ............................................................................. 190Table 71: Possible KRG pipelines .............................................................................................................. 204Table 72: Oil product imports, 2010 ............................................................................................................ 209Table 73: Output of petroleum products, 2006-10 ('000 b/d) ...................................................................... 210Table 74: Consumption of petroleum products, 2006-10 ('000 b/d) ........................................................... 211Table 75: Opec refining capacity complexity .............................................................................................. 212Table 76: Current installed refineries in Iraq ............................................................................................... 215

Table 77: North Refineries Company facilities ............................................................................................ 215Table 78: North refinery process units ........................................................................................................ 216Table 79: Salahuddin-1 refinery process units............................................................................................ 217Table 80: Salahuddin-2 refinery process units............................................................................................ 217Table 81: North Refineries Companys smaller refineries .......................................................................... 217Table 82: Midland Refineries Company facilities ........................................................................................ 218Table 83: Daura refinery production units ................................................................................................... 220Table 84: South Refineries Company facilities ........................................................................................... 220Table 85: Government allocated budget for downstream projects, 2005-14 ($m) ..................................... 224Table 86: Announced grassroot refinery projects ....................................................................................... 225Table 87: Nasiriyah refinery product slate (using Configuration-3) ............................................................ 226Table 88: Prequalified firms for Nasiriyah Integrated Project ..................................................................... 227Table 89: Nasiriyah refinery technology providers ...................................................................................... 228Table 90: Karbala refinery units under Technip design .............................................................................. 230Table 91: Karbala refinery product slate ..................................................................................................... 230Table 92: Kirkuk refinery units..................................................................................................................... 231Table 93: Kirkuk refinery product slate ....................................................................................................... 232Table 94: Missan refinery units ................................................................................................................... 233Table 95: Missan refinery product slate ...................................................................................................... 234Table 96: Refinery principles and challenges ............................................................................................. 236Table 97: Iraq refinery upgrade prgramme, 2012-2019 .............................................................................. 240Table 98: Government budgeted refinery upgrade programme, 2011-15 .................................................. 240Table 99: North refinery expansion projects ............................................................................................... 241Table 100: Daura refinery in 2010 .............................................................................................................. 242


8/24


Table 101: Daura refinery projects .............................................................................................................. 243Table 102: Status of Iraqs brownfield refinery projects .............................................................................. 244Table 103: Existing petrochemical facilities ................................................................................................ 247Table 104: Iraq fertiliser plants .................................................................................................................... 248Table 105: TTOPCO revenue, 2010-11 ...................................................................................................... 251Table 106: Kurdistan region refining projects ............................................................................................. 254Table 107: Iraq petrochemical projects ....................................................................................................... 255


9/24


List of figures

Figure 1: Nominal GDP, 2002-12 .................................................................................................................. 19Figure 2: Estimated average Iraqi civilian fatalities a year, 2003-11 ............................................................ 30Figure 3: Iraq estimated weekly fatalities, 2011 to mid-2013 ....................................................................... 31Figure 4: Oil Ministry organisation ................................................................................................................ 41Figure 5: Iraq government revenues versus oil prices, Jan 2010-May 2013 ................................................ 44Figure 6: Well requirements and rig count under IEAs central production scenario .................................... 52Figure 7: Iraq government capital expenditure forecast (2012-2030) ........................................................... 55Figure 8: Government capital spending, 2008-2015 ..................................................................................... 55Figure 9: Government expenditure, 2011-2015 ............................................................................................ 56Figure 10: Comparative value of energy projects in the Gulf region, 2005-12 ............................................. 57Figure 11: Iraq contract awards (2005-2013) ................................................................................................ 58Figure 12: Status of Iraq projects (%) ........................................................................................................... 58

Figure 13: Oil sector contract awards due in 2013 and 2014 ....................................................................... 59Figure 14: Gas sector contract awards due in 2013 and 2014 ..................................................................... 59Figure 15: Value of contracts for selected EPC firms ................................................................................... 60Figure 16: Reserves, 1980-2010 (billion barrels) .......................................................................................... 68Figure 17: Oil production, 1982-2012 (000 b/d) ........................................................................................... 69Figure 18: Iraqs major producing fields prior to the licensing rounds .......................................................... 71Figure 19: Oil production in Iraq, Saudi Arabia and Iran, 1982-2012 ........................................................... 72Figure 20: Number of active rigs, 2006-10.................................................................................................... 72Figure 21: Producing wells: comparison between Iran, Iraq and Saudi Arabia, 2006-10 ............................. 73Figure 22: Opec reserves and production by country ................................................................................... 73Figure 23: Iraq gas reserves map ................................................................................................................. 75Figure 24: Natural gas reserves, 1980-2010 ................................................................................................ 76Figure 25: Total gas reserves (%) ................................................................................................................. 77Figure 26: Iraqs major gas fields .................................................................................................................. 80Figure 27: Rumaila oil production profile, 2010-15 (000 b/d) ....................................................................... 86Figure 28: West Qurna-1 oil production profile, 2010-15 (000 b/d) ............................................................. 88Figure 29: Zubair oil production profile, 2010-16 (000 b/d) .......................................................................... 89Figure 30: Majnoon oil production profile, 2010-17 (000 b/d) ...................................................................... 96Figure 31: Other fields of first and second round production, 2010-17 (000 b/d) ........................................ 98Figure 32: West Qurna-2 oil production profile, 2010-17 (000 b/d) ............................................................. 98Figure 33: Iraqs gas field licensing auction ................................................................................................ 101Figure 34: Akkas gas production plan 2012-2036 ...................................................................................... 104Figure 35: Akkas field drilling requirements 2012-2035 .............................................................................. 104Figure 36: Akkas field facilities and pipeline plans ..................................................................................... 105Figure 37: Akkas field preliminary development plan ................................................................................ 106Figure 38: Fourth bid round exploration blocks........................................................................................... 109Figure 39: Government budget for state-funded oil and gas projects, 2010-14 ......................................... 113Figure 40: Northern oil field production expansion ..................................................................................... 114Figure 41: Iraqs short term maximum production target, 2014 .................................................................. 115Figure 42: Iraq crude oil production scenarios ............................................................................................ 116Figure 43: Iraq's four-year production plan, 2011-14 .................................................................................. 119Figure 44: Iraqs contracted capacity expansion......................................................................................... 120Figure 45: Projected oil production, 2010-29 (million b/d) .......................................................................... 120Figure 46: Ines oil production scenarios (million b/d) ................................................................................. 121Figure 47: Southern oil field reserves and production ................................................................................ 125


10/24


Figure 48: Water injection requirements ..................................................................................................... 126Figure 49: Proposed pipeline routes for CSSF ........................................................................................... 128Figure 50: Common seawater supply facility project concept ..................................................................... 129Figure 51: KRG production sharing contract structure ............................................................................... 131Figure 52: The KRGs major producing fields ............................................................................................. 133Figure 53: Shaikan field proposed development plan ................................................................................. 135Figure 54: Estimated oil and gas reserves at Kurdish discoveries ............................................................. 135Figure 55: Chemchamaal field .................................................................................................................... 141Figure 56: Iraqs oil flows, 2011 .................................................................................................................. 144Figure 57: Kirkuk to Baiji pipeline exclusion zone (PEZ) ............................................................................ 145Figure 58:Iraqs south oil pipeline network.................................................................................................. 148Figure 59: Iraqs current crude oil pipelines and pumping stations............................................................. 152Figure 60: Iraqs ports ................................................................................................................................. 153Figure 61: Iraqs southern oil export terminal expansion ............................................................................ 161Figure 62: Southern export storage and pumping stations ......................................................................... 162Figure 63: Planned export pipelines to Syria .............................................................................................. 163Figure 64: Proposed Iraq-Jordan crude oil export project .......................................................................... 164Figure 65: Iraqs BOOT pipeline structure .................................................................................................. 167Figure 66: Iraqs oil storage projects ........................................................................................................... 170Figure 67: Iraqs southern storage and export system expansion .............................................................. 172Figure 68: Iraq gas production and transportation, 2012 ............................................................................ 174Figure 69: Associated gas gathering, treatment and processing infrastructure in southern Iraq ............... 179Figure 70: Gas sector capital expenditure .................................................................................................. 180Figure 71: Iraqs current dry gas pipelines .................................................................................................. 181Figure 72: Projected gas volumes from licensed oil and gas fields, 2010-16 ............................................. 182Figure 73: Associated gas production plan, 2012-17 ................................................................................. 182Figure 74: Iraq gas production (2011) ......................................................................................................... 183Figure 75: Iraqs dry gas and LPGdemand (2012-2030) ............................................................................ 184

Figure 76: Gas supply and processing capacity (billion cf/d) ...................................................................... 185Figure 77: Gas value chain ......................................................................................................................... 186Figure 78: Iraqs gas transmission grid and proposed power plants .......................................................... 187Figure 79: Proposed gas pipeline network.................................................................................................. 189Figure 80: Proposed gas infrastructure network ......................................................................................... 190Figure 81: Proposed LPG transport infrastructure ...................................................................................... 191Figure 82: South Gas project: fields and facilities ....................................................................................... 193Figure 83: South Gas project: sour gas system .......................................................................................... 195Figure 84: South Gas project: overview of units required ........................................................................... 197Figure 85: South Gas Project: overview of capacity expansion.................................................................. 198Figure 86: Gas export opportunities ............................................................................................................ 199Figure 87: Kurdistan Iraq crude export (KICE) pipeline .............................................................................. 202Figure 88: Planned route for the Nabucco pipeline .................................................................................... 206Figure 89: Domestic refined product consumption, 2006 to 2011 .............................................................. 207Figure 90: Refined production consumption by province, October 2011 .................................................... 208Figure 91: Iraqs refined product supply and demand balance ................................................................... 209Figure 92: Iraqs refined product balance (2011) ........................................................................................ 209Figure 93: Output of petroleum products ('000 b/d) .................................................................................... 210Figure 94: Consumption of petroleum products, 2006-11 .......................................................................... 211Figure 95: Crude oil supplies to refineries, Jan 2009-Mar 2013 ................................................................. 213Figure 96: Existing pipelines and major refineries ...................................................................................... 214Figure 97: Iraq refineries and grassroot projects ........................................................................................ 222Figure 98: Comparison of regional downstream projects ........................................................................... 223Figure 99: Oil Ministry refinery expansion plan ........................................................................................... 224


11/24


Figure 100: Nasiriyah refinery configuration chosen by Oil Ministry ........................................................... 228Figure 101: Nasiriyah refinery production mix (%) ...................................................................................... 229Figure 102: Karbala refinery production mix (%) ........................................................................................ 231Figure 103: Kirkuk refinery production mix (%) ........................................................................................... 232Figure 104: Kirkuk refinery configuration .................................................................................................... 233Figure 105: Missan refinery production mix (%) ......................................................................................... 234Figure 106: INES recommended refinery plan............................................................................................ 237Figure 107: Forecast downstream and midstream capital expenditure (2012-2030) ................................. 239Figure 108: Gasoil and gasoline production under the Oil Ministry plan .................................................... 241Figure 109: Daura refinery configuration .................................................................................................... 244Figure 110: Iraq basic petrochmicals capacity build up plan (2012 -2030) ................................................ 248Figure 111: Urea capacity build up (2012-2030)......................................................................................... 250

Copyright 2013 MEED Media FZ LLC

All rights reserved. No part of this publication may be reproduced, stored in anyretrieval system, or transmitted in any form, by any means, electronic, mechanical,

photocopying, recording, or otherwise without the prior permission of the copyright

owner. While every care has been taken in completing this report, no responsibility can

be accepted for any errors or omissions that may occur.


12/24


1. Preface

Since 2003, Iraq has been talked about as the next big opportunity for the oil andgas industry. With some of the largest and largely untapped oil and gas reserves

on the planet, it has long been held up as the one market that could act as a

game-changer for the sector.

But it has only really been over the past three years that this potential has begun

to be realised. As peace and stability return to the country and the international oil

companies ramp up their spending on their field concessions, there has been a

marked increase in project activity since 2010.

In this latest MEED Insight report, we assess the various opportunities in the Iraqi

oil and gas sector across the value chain from the wellhead to the export terminal.

These opportunities and their challenges are analysed along with the history,

policy, targets, projects and key clients.

This report, an expansion and update to the best-selling 2012 version, has been

written by Adal Mirza, energy reporter and Iraq specialist at MEED. It is the

product of several months work and thanks go to everyone who made it possible.

Ed James, Head of MEED Insight, Dubai, August 2013


13/24


2. Executive Summary

With its enormous reserves, and equally big ambitions, the Iraqi oil and gas sectoris now opening up for business. In 2009, Iraq set itself on the road to an

unprecedented expansion of its oil and gas production, with plans to lift output to

more than 12 million barrels a day (b/d) by 2017 with the help of more than a

dozen international oil companies (IOCs).

The upstream expansion, matching in under a decade what Saudi Arabia

achieved in 70 years, will be accompanied by an overhaul of the countrys decrepit

oil and gas infrastructure. After years of conflict, with an estimated $300bn-worth

of energy projects planned over the next decade, the country will be the focus of

attention for investors in the region. Few other countries across the globe offer

such an opportunity.

But it also comes with considerable risks. Iraqs political instability and tense

security situation are just the most apparent of the obstacles ahead for the

projects market. In addition to this, there are a number of important questions over

the countrys ability to deliver on its potential.

One critical factor for the upstream sector is Iraqs own commitment to the

ambitious 12 million b/d target. More than three years into the plan, Iraq is now in

the midst of renegotiating its production targets with the IOCs and is expected to

make a decision on its long term production plans by the end of 2014. It is

expected to choose between the more realistic figures of 9 million b/d by 2020 or 6

million b/d by 2025.

Whichever target the Oil Ministry pursues, the challenges remain considerable.

Reaching 9 million b/d will require approximately $600bn in capital expenditure up

to 2030, with the Iraq government bearing the majority of the costs. This is in

addition to the logistical challenges of sourcing and deploying hundreds of drilling

rigs and thousands of trained staff to man the new facilities.

Nonetheless, Iraq is making progress. Production currently stands at more than 3

million b/d and is heading upwards. Iraq earned about $94bn from oil exports in

2012 and this is the critical source of government revenue. Further export capacity

growth, through pipelines and terminals will be fundamental to allow upstreamproduction growth over the next few years.

The key findings of the report are:

Iraq was the third largest overall project market in the region, after Saudi

Arabia and the UAE. Iraq is currently the fifth largest market for energy

projects in the Gulf region after Saudi Arabia, the UAE, Qatar and Kuwait.

The main driver of the projects market has been oil prices, which have

been consistently above the Iraq governments budget value over the last

few years, enabling greater spending on reconstruction and expansion.


14/24


This has been aided by the opening up of the oil sector, with the

participation of IOCs again since 2009.

Iraq set its highest ever budget in 2013 at $118bn, but it is unclear how

much will be disbursed given the countrys poor track record in pushing

ahead with major projects.

The largest portion of projects in the energy sector to be awarded will go

towards oil production worth an estimated $84bn in 2012 and 2013

planned. This is followed by some $18bn in the downstream oil sector and

$17bn in gas production.

So far, spending has been limited and focused on meeting the short-term

oil production capacity increases at the licensed fields. Longer-term

spending on permanent infrastructure such as processing facilities has

only just begun, and will soon be followed by full field developments in the

coming years.

Reaching the medium level of production set out by the Iraq National

Energy Strategy document will require approximately $600bn in capital

expenditure up to 2030, the majority of which will be borne by the Iraqi

government.

But these investments could generate more than $6 trillion worth of

revenues for the government up to 2030, mostly from the export of crude

oil.

Iraqs aged oil infrastructure will struggle to keep up with increases in oilproduction, with the potential for significant bottlenecks. Transport, storage

and export facilities all need to be upgraded to cope with the increased

production or Iraq will simply be adding idle capacity.

Many of these problems are not particularly challenging or technically

complex, but collectively place a huge burden on the Oil Ministrys limited

project handling capacity. Concerns are being addressed, but not at the

same time or pace.

While Iraq is making progress, there are a number of major projects that

will determine its oil production in 2015 which have yet to be sanctioned.

The best example of this is the Common Seawater Supply Facility (CSSF)

project, which remains in the early stages of design.

2012 was considered the break out year for Iraq oil and gas projects,

which a great number and value of projects awarded and now under

execution, such as for the West Qurna-2, Zubair and Badra oil fields,

facilities which are expected to come on stream at the year.

The scale of projects from 2010 to 2012 is consistent with output levels

reaching around 6 million b/d by 2020. Achieving sustained growth in

investment will be a constant battle, which will be affected by numerous

factors from politics and security to logistics. Legal and political obstacles remain critical challenges to the oil sector.


15/24


The downstream sector represents a $45bn-plus opportunity for

investment in several new refineries and the rehabilitation of Iraqs existing

plants. Despite its massive oil reserves, the country is still reliant on

imports for the majority of its refined products, a significant drain on the

state purse. Iraq has ambitions to become a major refined productexporter, increasing throughput to 900,000 b/d by 2017, but so far, the

government has failed to provide the right incentives for foreign investors.

The absence of an overarching oil law has been a major problem for the

sectors development. It will be critical to the long-term success of the

industry, along with the re-establishment of the Iraq National Oil Company.


16/24


3.3 Economy

Figure 1: Nominal GDP, 2002-12

e=estimate; na=not available

Source: IMF

Table 2: Iraq economic indicators, 2002-12

Indicator 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e 2012e

Nominal GDP

($bn) 20.5 13.6 25.8 31.4 45.1 57.0 86.6 65.2 82.2 108.4 128.1

of which non-

oil GDP 32.0 32.0 30.4 30.6 33.1 na na na na na na

Per capita

GDP ($) 802 518 951 1,124 1,568 1,926 2,845 2,087 2,564 3,301 3,808

Consumer

price inflation

(%) -7.8 -41.4 46.5 3.7 5.9 4.1 9.5 4.2 0.8 9.6 12.6e=estimate; na=not available

Source: IMF

Historically, Iraq's economy has been characterised by a heavy dependence on oil

exports and an emphasis on development through central planning.

Crude oil exports represent about 90 per cent of foreign exchange earnings and,

helped by a recent revival in oil exports and high crude prices, the economy is now

growing rapidly. According to the IMF, Iraqs nominal gross domestic product

(GDP) is set to double by 2015/16.

Increasing oil production has contributed to a rise in GDP per capita from $1,300

in 2004 to $6,300 in 2012. The economy is dominated by the oil sector which

0

20

40

60

80

100

120

140

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e 2012e

$bn


17/24


Figure 4: Oil Ministry organisation

Source: Oil Ministry

4.2.3 Oil exports and the State Oil Marketing

Organisation

Iraqs only official exporter of crude oil, refined products and natural gas is the

State Oil Marketing Organisation (Somo), which was created in 1997 as an Oil

Ministry subsidiary. It is responsible for all crude oil sales via export terminals inthe south, trucks to Jordan and pipeline sales through Turkey.

After the needs of the domestic refining and power market have been met, Somo

sells Iraqi crude according to global price formulas to achieve a maximum return.

In terms of its customers, priority is given to companies that have large refining

capacities, on the basis that they are better placed to withstand sudden price

fluctuations and to maintain demand for Iraqi crude oil over the longer term.

Contracts are based on semi-annual, annual or longer-term contracts. Since it was

nationalised in the early 1970s, Iraq has had a relatively stable list of some 26

customers. Attempts to expand this client list have never been seriously pursued,at least in part because of outdated marketing practices by Somo and corruption.


18/24


Figure 6: Well requirements and rig count under IEAs central production scenario

Source: IEA

Two parallel markets have been developing with the Big-Four service companies

offering large integrated service packages in the south and more fragmentation in

the exploration-oriented Kurdistan region in the north.

Although the Kurdish region represents only 5 per cent of Iraqs total production,

its reserves are significant, and the KRGs production sharing contracts have

attracted 50 operators to the region. However, given the relative youth of the

regions oil sector, the majority of wells are exploration and appraisal wells. Some30 exploration wells have been drilled and completed in the Kurdish region in the

last five years, resulting in more than 20 discoveries so far.

The region is getting to the stage where significant finds have been made, and are

now moving from exploration to production. As such, the outlook for rigs will be

similarly positive.

4.6.2 Customs and equipment

However, the biggest challenge will be bringing the rigs into the country. There is

only one real sea route. There is also the long wait for approvals at customs.


19/24


Many major projects are due to come to the market in the near future. Shell is

expected to issue a major set of tenders in 2013 or early 2014 for a second phase

of central processing facilities at the Majnoon oil field. This will include a 200,000-

b/d oil separation plant, a 250,000-cf/d gas treatment plant, as well as a 42-inch,

160km export pipeline, along with storage tank farms, enabling works, roads and

bridges.

BP is also expected to issue to tenders for new production facilities at the giant

Rumaila oil field, Iraqs largest producing field. There will also be major

opportunities in the downstream sectors, where Iraq is making progress on two of

its planned grassroot refineries.

4.9 Construction opportunities

The key feature of Iraq is the need to move ahead with numerous large projects

over a short period of time when both experience and infrastructure is scarce.

Bottlenecks in infrastructure, labour and capital, along with Iraqs politicalinstability, are all major issues.

According to regional projects tracker, MEED Projects, Iraq has a total of $8.45bn

worth of engineering, procurement and construction (EPC) projects under

execution. The regions largest EPC market, Saudi Arabia, by comparison has

awarded an estimated $53bn worth of projects.

However, a comparison of the two countries planned projects is revealing. Iraq has

a total of $78.5bn worth of projects currently in the design, prequalification or

bidding stage, compared to $41.2bn in Kuwait and only $12.8bn in Saudi Arabia.

Figure 10: Comparative value of energy projects in the Gulf region, 2005-12

Source: MEED Projects

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Iraq Saudi Arabia UAE Kuwait Oman Qatar

Execution FEED Main Contract Bid Main Contract PQ


20/24


Figure 18: Iraqs major producing fields prior to the licensing rounds

*fields now operated in joint venture with international oil companies

Source: MEED Insight. Note the map can be zoomed to make it more readable

5.1.3 Regional comparisonThe scale of the task facing the Oil Ministry as it tries to revive the countrys oil and

gas industry becomes clear when Iraq is compared with its two key regional rivals

of Iran and Saudi Arabia.

In the mid-1960s, all three countries were producing close to 2 million b/d of oil.

Since then, Saudi Arabia has increased its capacity fivefold and Iran has doubledits output, while Iraq has lost ground to both. Iraq is also languishing behind both

Iran and Saudi Arabia on the basis of three other key measures of the health of its

oil sector: the number of active rigs, the number of completed wells and the

number of producing wells.


21/24


7.5 Iraqs existing refineries

Iraqi refining capacity is divided into three operating companies. The North

Refinery Company is headquartered at the Baiji Oil Refinery, the Midland Refinery

Company is headquartered at the Daura Refinery, while the South Refinery

Company is headquartered at the Basra refinery. All of these companies fall under

the control of the Deputy oil minister Ahmed al-Shamma.

Figure 96: Existing pipelines and major refineries

Source: MEED Insight


22/24


Figure 104: Kirkuk refinery configuration

Source: North Oil Company

7.6.5 Missan refineryShaw has also completed the studies and designs for another 150,000 b/d refinery in

the Missan province on Iraqs southeastern border with Iran. The refinery is also

estimated to cost $5bn.

Table 94: Missan refinery units

Process units Capacity (b/d) Process technology licensor

Atmospheric distillation unit 150,000 Shaw Energy & ChemicalsVacuum distillation unit 82,300 Axens

Naphtha HDS unit 31,800 Axens

Reforming unit (CCR) 22,500 Axens

C5/C6 isomerisation unit 11,600 UOP

Saturated LPG treatment unit 2,200 Axens

Kerosene HDS unit 16,700 Haldor Topsoe

Gas-oil hydrotreating unit 30,300 Haldor Topsoe

Vacuum gas-oil hydrotreating unit 56,300 KBR

Solvent de-asphalting unit 46,700 Axens

De-asphalted oil HDT unit 27,600 Axens

Fluid catalytic cracking unit 42,300 KBRUnsaturated LPG treatment unit 9,800 Axens


23/24


By 2030, the study forecasts total capacity reaching 16.8 million t/y. By comparison,

Saudi Arabias capacity in 2011 was 22 million t/y, and Iran stood at 9 million t/y.

Domestic demand is not expected to reach more than 1 million b/d, leaving the

majority of production for export.

Methane-based urea fertilizer production is another possibility. In 2009, Iraq spent

more than $100m on importing 293,000 tonnes of fertilizers. INES suggests

increasing production to meet local demand of around 2 million t/y through the

rehabilitation of Iraqs existing plants and addition of 700,000 t/y by 2017 with small

short term facilities located near domestic demand centers. In the longer term this

would then be ramped up to 8.3 million t/y by 2028 as greater volumes of methane

become available, with around 6 million t/y for export.

Figure 111: Urea capacity build up (2012-2030)

Source: Ines

Both urea and petrochemical production will require significant volues of gas

feedstock, rising to as much as 2 billion cf/d by 2030.

7.10 Downstream oil in the Kurdistan region

The Kurdistan region is a net importer of refined products, despite having excess

crude oil production. To counter that, the Kurdistan Regional Government (KRG) is

planning to raise its refining capacity. The KRG says its refining capacity is around

114,000 b/d from two refineries; Bazian and Erbil. Add to this numerous topping

plants and refining units at the producing fields and Genel Energy estimates that the

0

1

2

3

4

5

6

7

8

9

Existing urea capacity Rehabilitated capacity New capacity


24/24

Name ________________________________________

Company name ______________________________

Job title _____________________________________

PO box _____________________________________

Address _____________________________________

______________________________________________

Postcode ___________________________________

Country _____________________________________

Email address for report delivery

________________________________________________

Telephone _______________________________

Fax _________________________________________

Return your order nowPlease quote priority code: IOG03

Tel: +971 (0)4 390 0436Fax: +971 (0)4 368 8023Email: [email protected]

Data protection

Please tick if you do not wish to be contacted by

MEED or third parties carefully screened by MEED

Place your order by completing this form.Your report will be sent in a convenient PDF

format straight to your desktop.

Your details

Iraq Oil and Gas ProjectsMarket Report 2013

Order Form

A comprehensive overview of Iraqsupstream oil and gas, downstream

refining and petrochemical sectors, witha particular focus on the projects market

Payment details

Bank Transfer

Bank account name: MEED Media FZ LLCIBAN: AE760200000022156251101Bank account number: 022-156251-101SWIFT: BBMEAEADBank: HSBC Bank Middle East LimitedBranch: Emaar Square BranchAddress: Building 5, PO Box 502601, Dubai

Please fax a copy of transfer details to:+971 (0)4 368 8023

Please choose ONE payment method below:

Credit CardPlease debit $____________ from my credit card

Mastercard Visa

Name of cardholder

___________________________________________

Card number

____________________________________

Expiry date

______/___________

Signature

__________________________________________

Price: $4,995 (please note: subscribers to MEEDProjects benefit from a discount pleasecontact MEED Insight to find out more)

Price: $5,500 (Executive package inclusive of asubscription to MEED Magazine & MEED.comNote: Original price is $6,490 saving you $990)

Please tick below if you are interested in any other

market intelligence report from MEED InsightSaudi Arabia 2013 Qatar Projects 2013UAE Projects 2013

How did you hear about this report tick one box

Signature:

Company stamp:

email advert MEED.com

article in MEED Other _______________

Mi Iraq Oil Gas 2013

Documents

Transcript of Mi Iraq Oil Gas 2013