Page 5 - MEOG Week 16 2021

MEOG COMMENTARY MEOG

West Qurna-2 forms the larger, southern seawater from the Gulf, treat it and then pipe it to
development project to tap the broader deposit, major southern oilfields, where it will be injected
for which Lukoil receives a per barrel fee of just to increase pressure in oil wells, including those
$1.15. at WQ-1.
These fees compare with up to $6 per barrel at A $2.4bn package for the development of
other fields and ExxonMobil has been reticent to CSSP was then awarded to South Korea’s Hyun-
increase its exposure to the project. dai Engineering & Construction the following
month. However, with the scheme having now
IOC outs and in been stalled for around 10 years, Exxon’s role as
ExxonMobil’s apparent decision to leave WQ-1 the project’s lead developer was transferred to
is a significant setback for Baghdad, which had Total as part of a broad, $7bn deal signed in late
been attempting to convince the firm to increase April.
its stake. It follows the sale by Royal Dutch Shell Almost immediately after the signing of the
in early 2018 of its 20% stake in the oilfield to deal with Total, Oil Minister Ihsan Abdul Jabbar
Itochu, with the company having pulled out of said that the country intends to raise production
the nearby Majnoon oilfield as part of efforts to capacity to 8mn bpd by 2029, up from the cur-
focus on profitable gas developments in the wake rent 4.8mn bpd level, adding that capacity could
of its 2016 takeover of BG Group. reach 12mn bpd. WQ-1 and the CSSP will play
The writing appears to have been on the a major role in the whether or not this target is
wall for Exxon for some time, though, with achieved.
reports emerging in November last year that The importance of treated water is exem-
state-owned China National Petroleum Corp. plified at the Rumaila field, for which the Qar-
(CNPC) and China National Offshore Oil Co. mat Ali water treatment plant provides around
(CNOOC) were considering buying the US 500,000 bpd of water, and the capacity could be
firm’s stake. At the time, Bloomberg quoted doubled to avoid reliance on the CSSP. However,
sources as saying that the 32.7% stake could be with water-flooding planned to boost output,
worth $500mn, but given the challenging terms, estimates have suggested that the field’s water
Iraq’s struggles with corruption and increasing requirements could reach 8mn bpd.
scrutiny of environmental, social and govern- In addition to the CSSP and solar energy pro-
ance (ESG) performance, finding a new buyer jects, Total’s deal also covers the construction of
may present a challenge. a facility to produce natural gas from WQ-2 as
In May, discussions had broken down well as the Majnoon, Artawi, Tuba and Luhais
between Exxon and the ministry about the oilfields, reaching 300mn cubic feet (8.5mn
long-delayed Common Seawater Supply Project cubic metres) per day in phase one and doubling
(CSSP), which is key to Iraqi efforts to expand oil in phase two. It will also work to increase output
production capacity. from the Artawi oilfield from the current 60,000
The CSSP is designed to take 2.5mn bpd of bpd to 200,000 bpd.™

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