DUBAI: A lack of water threatens Iraq’s plans to raise its oil output, boost its stumbling economy and become a leading producer in the region after Saudi Arabia.
A multi-billion dollar common seawater injection scheme designed to boost production from the giant export oilfields in Iraq’s south is snarled up in red tape and acrimony.
The seawater injection project is core to the development of the southern fields — which account for most of Iraq’s production — and aims partly to flush oil to the surface and overcome declines in production at fields such as Rumaila, West Qurna, Zubair and Majnoon.
While the Islamist insurgency has hit oil exports from Iraq’s northern pipeline, the southern oilfields have not been affected by Baghdad’s fight with Islamic State. But the shortage of water is hurting production at two main southern fields: West Qurna-1 and Zubair, official and industry sources said.
Further production declines from both mature fields look likely if water scarcity persists.
Output from West Qurna-1 — operated by ExxonMobil — has fallen almost 40 percent to around 300,000 barrels per day compared with last year, an industry source said, adding that a shortage of water was one of the reasons.
Zubair, run by Italy’s ENI, is feeling the pain too. A source at state run South Oil Company said production from Zubair had fallen, but declined to give further details. It was currently pumping around 280,000 bpd.
“100 percent correct,” another Iraqi oil source in Baghdad said when asked if lack of water was a reason behind the production decline in the two oilfields.
Infrastructure and logistical constraints, as well as security worries, have already forced Iraq to cut its 2014 oil output target more than once — to 3.7 million bpd from an initial target of 4.5 million bpd, excluding Kurdish oil exports. Saudi Arabia’s output was around 9.6 million bpd in August, according to Opec figures. The water injection project, where the first phase is designed to pump 5.2 million bpd of treated seawater from the Gulf to the fields, was originally supposed to be completed by the end of 2013. It is now not due to come online before 2018-2019, the sources say.
When the plan was announced in 2010, US oil company ExxonMobil was chosen to take the lead in coordinating initial studies for the plan. But red tape and disputes over cost delayed the plan for months, and Exxon was removed from the project in 2012 due to disagreements over the economics of the deal. State-run South Oil Co has since taken over project management.
Apart from the project itself, hurdles to approving contracts for service work, such as building new pipelines and drilling wells, as well as getting visas and customs clearance are top complains by oil executives working in the south.
“It is not just getting the water to the field, it is getting the pumps and pipes to get it into the ground, and then new kit to separate out the larger quantities of water,” said a second industry source. “Quite a bit of the fate of production is in the hands of those who have the inclination to speed up the process.”
Officials at South Oil Company could not be reached for comment and an oil ministry spokesman said he had no immediate comment and was still looking into the matter.Reuters
