Page 4 - MEOG Week 47 2021

MEOG COMMENTARY MEOG

Iraq maintains 2027 optimism

Baghdad remains optimistic about its plans to dramatically increase oil production
over the next six years, but as ever, much will depend on political and security stability.

IRAQ IRAQ doubled down this week on its ambitious bpd at the Mishrif formation.”
plans to achieve a 3mn barrel per day (bpd) oil He added: “This year, we plan to start 30,000
production capacity increase by 2027, adding bpd production from pilot wells of the Yamama
WHAT: that it would reduce to zero all gas flaring by the formation.” This follows the drilling of a three-
Iraq is hopeful that same date. well pilot oil programme targeting the Yamama
renewed commitment The oil target was announced earlier this year to produce 10,000 bpd per well over a three-
from IOCs will maintain and the Ministry of Oil (MoO) has since rene- month period. Abdul Jabbar highlighted this,
momentum in the gotiated with IOCs developing the country’s adding that “there are projects to catch gas under
upstream as it seeks to supergiant southern fields the planned produc- promotion and projects to improve the environ-
rapidly grow production. tion plateau downward from the 12mn bpd tar- ment in the fields and surrounding areas”.
get envisaged in their technical service contracts The full 350,000 bpd addition to current out-
WHY: (TSCs) agreed in 2009/10. put levels will be achieved through the Yamama
Expansion projects at At the same time, Baghdad has largely man- expansion. WQ-2 forms the smaller of two devel-
several major oilfields aged to ward off efforts by some firms to leave opment projects to tap the West Qurna deposit
will be central to the the country, encouraging them to commit to which has estimated oil reserves of around 33bn
plans and new drilling new drilling plans and even attracting new barrels, with West Qurna-1 (WQ-1) to the south
work is underway across investment. holding the larger, 20bn barrel share.
the country. Still, 3mn bpd is a sizeable increase and with The field’s production plateau was previ-
Iraq continuing to face political uncertainty as ously revised downward first from 1.8mn bpd to
WHAT NEXT: well as concerns about security, infrastructure, 1.2mn bpd and then to 800,000 bpd, though the
These campaigns all water availability and reservoir pressure, all timeline for the latest revision was also extended
emit positivity though while IOCs adjust to align with new environ- from 2025 to 2030.
the availability of water mental expectations, scepticism about whether Lukoil holds a 75% stake in the WQ-2 TSC
and a stable political and it can be achieved appears reasonable. alongside the state-owned North Oil Co. This
security situation will be accords the developers a maximum remunera-
just as important. Qurna-2 uptick tion fee of just $1.15 per barrel, and according
The MoO said this week that it expects oil pro- to Wood Mackenzie, Lukoil’s net profit from
duction to increase at the West Qurna-2 (WQ2) WQ-2 is just $0.56 per barrel of oil equivalent
oilfield more quickly than had previously been when considering state equity interest and tax,
anticipated. with this dropping to $0.19 per boe after apply-
With the asset currently capable of producing ing the performance factor.
400,000 barrels per day (bpd), Oil Minister Ihsan
Abdul Jabbar told the Iraqi News Agency (INA) Qurna-1 also increasing
that peak output would be achieved three years At WQ-1, the saga of ExxonMobil’s departure
ahead of the timeline estimated by its Russian remains ongoing following Baghdad’s refusal to
lead developer Lukoil. allow a Chinese state firm to take the super-ma-
He said that “the field’s peak production jor’s place.
is expected to reach 800,000 [bpd] in 2027”, However, a consortium comprising Halli-
coinciding with the target date for achieving its burton, the UK’s Wood Group and American
nationwide output increase with Lukoil’s VP for investment firm Twelve Seas Investment Co. is
finance Pavel Zhdanov having noted in August understood to have submitted a bid to take over
that the company still plans “to reach the target the 32.7% operated stake, and potentially adding
of 800,000 bpd by 2030, but it is probably too to Baghdad’s prized Western IOC partners.
early to talk about this”. Though output has been running at around
WQ2 output levels for Q3 have not yet been 380,000 bpd, at 500,000 bpd the field’s capac-
disclosed, but production reached 400,000 bpd ity comprises around 10% of the national total.
in Q2 having averaged around 350,000 bpd dur- WQ-1’s continued development will play a major
ing the period owing to OPEC+ restrictions, role in Iraq’s plans with minority ExxonMobil
though this marked an increase on Q1 when oil and its partners committing earlier this year to
flows ran at 307,500 bpd. a 96-well drilling campaign with Schlumberger
Zhdanov said that the “next development that will increase capacity to 700,000 bpd.
stage of the project is to reach production of While no date was given for the completion
480,000 bpd. Next year we will increase produc- of this project, Middle East Oil & Gas (MEOG)
tion from the current 400,000 bpd to 450,000 understands that it is also targeted for 2027.

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