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Iraq’s Oil and Gas Upstream Future Trend

Article · October 2018

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 R e g i o n a l F O C U S
Iraq's Oil & Gas Upstream Industry

Iraq’s Oil and Gas Upstream Future

Trend
Editorial sources to use in power plants as a source of energy and
stop importing gas from Iran for domestic consumption,
even will become a gas exporter in the near future. The
The future of the Iraq is highly dependent to oil resource
total gas demand projection is 4.75 Tcf by 2022, mean-
development. “Global oil demand shows no sign of
while, gas processing capacity will be expanded by 2250
peaking in the foreseeable future; it is expected to pass
MMSCFD through LR2 gas processing facilities. Basra
100 million bbl/d mark for the first time in 2020…Oil to
Gas Company will play an important role in extending
continue to dominate the world’s primary energy mix at
the gas processing capacity.
least until 2040” OPEC’s Secretary General, HE Moham-
Natural gas application is divided in following sections:
mad Sanusi mentioned. Growing global demand for
1-Using gas as a fuel in power generation sector which
fossil fuels despite the emersion of novel energies is a
reduces oil consumption in power plants and increases
good news for oil exporting countries, especially Iraq.
oil export.
Through establishing security, after ISIS defeat, along
2-Domestic consumption
with oil prices rebound, the Iraqi government intend-
3-Export to foreign countries, such as Europe
ed to rebuild the country’s major infrastructures and
4-Gas injection to enhance oil production, reducing the
reform the economic conditions in long term. Develop-
requisite to water flooding in oilfields (water supply is a
ment of oil and gas energy sector will be Iraq’s first pri-
challenge in present water flooding projects)
ority, because of national budget reliance to oil export
and revenues.
Iraq aims at boosting oil production from 5 million bbl/d
to 7 million bbl/d by 2022. To achieve this goal, export-
ing and refining infrastructures and capacities need to
be expanded through construction of new refineries,
rehabilitation of current refineries, and exporting termi-
nals. It is estimated that $4 billion is required to increase
refining capacity by 1.5 million barrels until 2021.

Figure 2 Iraq’s Gas Resources

Figure 1 Oil Prices Projection

Iraq’s Long Term Aims:

1-Development of Gas Resources :
OPEC has forecasted that natural gas will consider large
percentage of future energy. Iraq has 112 Tcf reserves
of proved gas, deemed as 11th largest country in the
world, but much of them are not developed or less de-
veloped. Gas resource plays a key role in future of Iraq,
so will increase its revenue from export energy sources.
Iraq will initiate an extended development of gas re- Figure 3 Predicted Gas Export and Domestic Demand

DRILLING MAGAZINE

82
February & March 2018
 R e g i o n a l F O C U S

Iraq's Oil & Gas Upstream Industry

Natural gas will provide a secure and reliable power for
country, also contains valuable components such as
LPG, which is used as a fuel for cooking. Moreover, High
content of ethane in these gas resources is an advan-
tage which could give Iraq a strategic advantage over
Middle East countries, need ethane and produce more
valuable feedstock like naphtha.
The associated gas separated from produced oil was
burned off before, due to lack of special infrastructures
for capturing associated gas. Ministry of Oil recently ar-
ranged an agreement with number of IOCs to capture
and store associated gases, so as to stop flaring gas by
2020.
Much of the Iraqi transportation infrastructure was built
in the 1970s and 1980s, and needs widespread rehabili-
tation and replacement. Improving infrastructure will be
a key element for opening Iraq to global markets.
4-Iraq will offer a sustainable and transparent fiscal
framework for IOCs payments and protect the investor’s
interests in energy sector investments.
As Iraqi Ministry of Oil announced before, at least 3 con-
tract models will be exposed during recent round of
bidding. About 26 companies were qualified by MoO in
recent round of bidding, which represents the anxiety of
these companies to work in Iraq. Iraqi government be-
lieves that this new model will be more attractive than
previous model (T.S.C) to FOCs and decrease the risk of
investment significantly.

Figure 4 Projected increase in gas processing capacity
5-Growing Investments
Growing oil prices are encouraging producers to pur-
sue their ambitious investment plans to increase their
production capacity, yet the growth rate of capital ex-
penditure in the Middle East and Iraq will naturally be
slower than in previous years. Furthermore, Iraq seeks to
double the production capacity of some of its oil fields,
as part of a plan to increase oil production from 5.5 mil-
lion barrels per day to 6 million barrels per day by 2020
(7 million barrels/day by 2022).

2-Resolving Political Conflicts

Baghdad-Erbil old conflicts became intense after hold-
ing an independence referendum, such that central
government announced it illegal and convicted the
KRG authorities without considering the role of Pesh-
merga in defeat of ISIS, followed by invasion of Kirkuk
by central government’s military forces and regaining
the control of the oilfield facilities. Since then the rela-
tionship between both sides is complex and fragile, pre-
senting challenges which shadow the oilfield develop-
ment activities in KRG. Even though, presence of IOCs in
this region less affected by this issue. Baghdad is going
to limit the KRG’s allocated budget and oil exports from
Figure 5 Revised Targets for Major Oilfields by 2020
the region. It is expected that Iraq reactivate the North
export terminal to raise the oil export near future, cur-
rently trying to balance the export decline by increasing
export from Basra port. Also Baghdad-Erbil negotiation
on the share of resources will be continued.

3-Rehabilitation and strengthening of Infrastructures to

fulfill Iraq’s ambiguous targets

DRILLING MAGAZINE

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February & March 2018
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