Page 6 - MEOG Week 23

MEOG Commentary MEOG
Iraq sees Exxon
workers return as
Marathon finalises sale
Prospects for Iraqi production growth will be buoyed by the
swift return of evacuated ExxonMobil staff, while the closure of Marathon’s Atrush sale is good news for ambitious junior ShaMaran.
IraQ
What:
ExxonMobil’s west Qurna-1 site currently produces around 440,000 bpd and plans are underway for major increases, while the Atrush eld is turning into a good news story for Kurdistan.
Why:
ShaMaran and TAQA have increased their shares in Atrush with the Canadian rm targeting an FID
to increase capacity to 100,000 bpd by early 2020.
What next:
The head of basra Oil Co. told reporters last week that Hyundai E&C had been selected to build a seawater facility that would enable major production increases in southern Iraq.
IrAQ’s Ministry of Oil (MoO) said last week that foreign employees of ExxonMobil would return to work near the border with Iran follow- ing agreement by Baghdad to increase its secu- rity provision.
Around 60 workers had been evacuated from the West Qurna-1 oil eld last week, with Exxon- Mobil ying them to Dubai, while the Us with- drew non-critical sta from its Iraq embassy in Baghdad amid growing concerns about Iran and shi’ite proxies in Iraq.
Ministry spokesman Assem Jihad was quoted by AFP as saying that the Us super-major had “accepted that the 83 employees evacuated will resume their posts” from June 9, noting that the local authorities had taken “the necessary secu- rity measures”.
MoO o cials were quoted by reuters as say- ing last week that the ministry had accepted a request by ExxonMobil for a greater police and army presence both at the drill site and living quarters, with the company receiving letters of assurance from the MoO and Basra Oil Co. (BOC).
ExxonMobil holds stake of 25% in West Qurna-1 and is partnered by Japan’s Itochu Corp. (20%, bought from shell last year), Pet- roChina (25%), Pertamina (10%) and Basra Oil Co. (BOC, 20%). e eld holds an estimated 9 billion barrels of crude oil reserves and the MoO has been pushing for expansion, with the asset key to national production goals.
“Even before the shell sale, the MoO was talking to ExxonMobil about increasing its par- ticipation in the site, including increasing the per barrel fee the company would receive, but technical problems remain,” an Iraq source told Middle East Oil & Gas (MEOG). “ e headline figure of a maximum Us$1.90 per barrel for West Qurna-1 is among the lowest o ered to IOCs. For other potential projects, IOCs (includ- ing ExxonMobil) are currently being o ered as
much as Us$6 per barrel in some cases, so com- mitting extra funds to West Qurna-1 is a major risk,” he said.
Unlocking Qurna’s potential
e northern part of the West Qurna eld, West Qurna-2, is operated by russia’s lukoil, which has reached 650,000 bpd of production over various extended periods, and it flows stably around 400,000 bpd. In late 2017, lukoil agreed to commit to further investment in the eld to add another 80,000 bpd by 2020 and a further 650,000 bpd in Phase 3, which will target the Yamama formation.
At Qurna-1, production is running at around 440,000 bpd, with BOC director general Ihsan Abdul Jabbar telling reuters in late May that this would increase by 50,000 bpd within the “next few days”.
Much of the planned additional produc- tion from the West Qurna concessions will be dependent on the successful realisation of the Common seawater supply Project (CssP), now part of the larger-scale Integrated south Project.
is facility is intended to take and treat sea- water from the Gulf, then transport it via pipe- lines for water injection to boost pressure in oil wells. “ e CssP is essential for the really big production increases from the major elds that were part of the [MoO’s] original output targets when it was looking at 9 million bpd back in 2015, and West Qurna 2 is no exception,” rich- ard Mallinson, analyst for Energy Aspects, told MEOG. The project’s proposed capacity has been more than halved to around 5 million bpd of water, with upstream operators having imple- mented independent solutions in the meantime.
MEOG understands that ExxonMobil com- mitted to investing Us$420 billion over the rst 10-year period of its West Qurna-1 contract to build out all of the necessary infrastructure, including constructing the CssP, and executing
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w w w . N E W S B A S E . c o m Week 23 11•June•2019