Iraq. Iraq s future oil production: practical issues, pace and sustainability. Dr. Peter R. A. Wells CWC Iraq Conference November 2010

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1 Iraq Iraq s future oil production: practical issues, pace and sustainability Dr. Peter R. A. Wells CWC Iraq Conference November 21 Neftex Petroleum Consultants Limited

2 What matters? Reservoir geology and reservoir fluids Logistics (drilling, water, gas, export) and investment capacity OPEC - demand

3 SW Three main reservoirs.. NE Mishrif (24-28 o API, 4% S) (gas or water injection) Heterogeneous, rudist development on top of active structures notably West Qurna Initial flow rates good from high permeability rudist facies but pressure support downdip is non existent Zubair (34-36 o API, 1% S) (water injection) Layered sand-shale sands peter out to the east and north Fining upwards so attic oil is in poor reservoirs; water breakthrough in permeable layers Strong aquifer support from the west Yamama (37-44 o API,.5% S) (gas miscible flood?) High quality packstones and grainstones, in layered reservoir Limited aquifer support due to downdip cementation below hydrocarbons Tarmats in Kuwait and asphaltenes in Iran

4 Oil-initially initially-in-place (OIIP) mainly in the Mishrif, Yamama and Zubair Others Yamama Zubair OIIP Rumaila (~8 billion b) Mishrif OIIP West Qurna (~7 billion b) OIIP Southern Iraq (28-3 billion b) OIIP Majnoon (~38 billion b)

5 Most of the oil is in poor reservoir A lot of the oil in the best reservoir has been produced. Average initial production rate per well, b/d 2, 1, 5, 2,5 1, Yamama API Zubair API No aquifer pressure support Aquifer pressure support Mishrif Oil initially in place billion b API

6 Iraq.. Southern oil fields Rumaila produced 8% of the oil to date CNPC, Petronas, Total Shell, Petronas ExxonMobil, Shell IOR Produced Lukoil, Statoil ENI, Oxy, Kogas Billion b BP, CNPC Remaining

7 Development complexity, preference and export 23-8% Zubair 22-33% Zubair, 33% Yamama, 33% Mishrif Field development Mishrif PU Blend, Batch or Dedicated gathering and export system for each crude stream?? Zubair Yamama PU PU 35 API 1.5% S?? Export Mishrif Zubair? Yamama Mishrif Yamama 26 API 4% S 42 API.5% S Implications for: storage facilities (size and locations), scheduling (pipelines, loading facilities, tankers) and trading skills

8 Rumaila and West Qurna Michael Daly, BP in Rumaila, IP Week, Energy Institute February 21

9 b/d Rumaila: bid target (2.85 million b/d) Base Ultimate Recoverable (UR) 27 billion b..?? 3,, 2,5, 2,, 1,5, Ahwaz 1.2% Gachsaran 1.2% Marun 1.% Prudhoe Bay 4.% Forties 7.% max offtake 3.7% Decline rates must exceed 2% pa 1,, 5, Zubair base Mishrif base Yamama Zubair is 5-7% depleted

10 Rumaila: bid target (2.85 million b/d) and Improved Oil Recovery (IOR), UR 37 billion b. Just Possible!! 3,, 2,5, 2,, Ahwaz 1.2% Gachsaran 1.2% Marun 1.% Prudhoe Bay 4.% Forties 7.% max offtake 2.8% b/d 1,5, 1,, 5, Zubair base Zubair IOR Mishrif base Mishrif IOR Yamama Zubair is 5-7% depleted

11 Rumaila: long plateau (1.8 million b/d) and IOR, UR 37 billion b. 3,, 2,5, 2,, Ahwaz 1.2% Gachsaran 1.2% Marun 1.% Prudhoe Bay 4.% Forties 7.% max offtake 1.8 % b/d 1,5, 1,, 5, Zubair base Zubair IOR Mishrif base Mishrif IOR Yamama

12 Iraq overall production capacity profile sustainable at ~1 mln b/d for >25 years b/d 14,, 12,, 1,, 8,, 6,, Bid plateaus, reported reserves an impossible combination Long plateaus, reported reserves??! Nahr Umr Majnoon Other producing fields Zubair Bid plateaus, IOR reserves possible Discovered non producing EOR 4,, 2,, W Qurna Rumaila Kirkuk

13 Cost (capacity cost ~$1,/b/d).bid plateaus translate to impossible spend rate $ billions $ billions Rumaila West Qurna Zubair Majnoon Halfaya Bid plateaus, IOR reserves Rumaila West Qurna Zubair Majnoon Halfaya Long plateaus, IOR reserves

14 Number of wells per year. 1,2 1,2 1, 1, Number of wells Number of wells Rumaila West Qurna Zubair Majnoon Halfaya Bid plateaus, IOR reserves Rumaila West Qurna Zubair Majnoon Halfaya Long plateaus, IOR reserves Water/gas supply, distribution, injection and commercial arrangements Export capacity Logistics supply chains, ports/security

15 Water injection requirements 16,, 14,, 12,, 1,, Bid production capacity cases with reported reserves and IOR b/d 8,, 6,, 4,, 2,, Most likely actual production Most likely production capacity cases with reported reserves and IOR

16 Export capacity requirements 14,, Bid production capacity cases with reported reserves and IOR 12,, 1,, Most likely production capacity cases with reported reserves and IOR b/d 8,, 6,, 4,, Most likely actual production 4 new SPM Khor al-amaya 2,, ABOT Turkey

17 Gas gathering requirement Bid production capacity cases with reported reserves and IOR bcf/d Qatar production in 29 (8.6 bcf/d) Most likely production capacity cases with reported reserves and IOR 2 Most likely actual production

18 Iraq s s production constrained by subdued call on OPEC until ,, 3,, Catch Iran Parity with Iran OPEC s swing producer b/d 25,, 2,, 15,, 1,, Spare capacity Iraq Iran Qatar UAE Kuwait 5,, Saudi Arabia Saudi Arabia Kuwait UAE Qatar Iran Iraq Spare capacity Call on OPEC and spare capacity from World Oil Supply Model developed for Toyota Motor Company

19 Bid plateaus case.. spare capacity that will probably not be needed 16,, 14,, Bid plateaus 12,, 1,, Long plateaus b/d 8,, 6,, 4,, 2,, Iraq forecast production Iraq forecast production Iraq capacity, long plateaus case Iraq capacity, bid plateaus case Iraq production forecast from World Oil Supply Model developed for Toyota Motor Company

20 Iraq is by far the largest potential new production capacity increment million b/d non Opec crude oil Saudi Arabia Kuwait Iran UAE Libya Nigeria Venezuela NGL Increment 21 to 215 Can. tar sands CTL Iraq -4 Change in production capacity Data from World Oil Supply Model developed for Toyota Motor Company

21 Conclusions Bid production capacity profiles are improbable: Difficult to achieve even with most likely reserves Investment, drilling demands etc., etc. are well in excess of capability in the medium term Rapid build up is not needed (call on OPEC) Long lower production capacity plateaus are in line with likely demand and achievable >9 million b/d for >25 years from 22/225 Iraq is by far the largest potential new supply increment over the next decade Iraq s future production capacity will affect crude oil price, demand and the global economy the last silver bullet?