Iraqi seawater-based project faces setbacks

Iraq’s oil production may be facing new challenges as the government and an ExxonMobil-PetroChina partnership struggle to find mutually acceptable contract terms.
 
The Iraqi government will not agree to a production-sharing scheme for the Nahr bin Umar and Artawi fields that the super-major sought as part of the $53 billion Southern Iraq Integrated Project (SIIP). SIIP comprises multiple upstream infrastructure projects in the Basra province, including a seawater treatment facility with the capacity to provide an initial 5 million bbl/d of water – scalable up to 7.5 million bbl/d – for enhanced recovery campaigns.
 
The project began in 2010 as the standalone Common Seawater Supply Project (CSSP). It was to supply 12 million bbl/d of water to several operators by 2013. However, geopolitical tensions, financial challenges, persistent security issues and contract disputes, with ExxonMobil and the CNPC subsidiary stepping in and out several times, have impeded the project’s completion.
 
Key progress was made in May when state-owned Basra Oil Company signed a letter of intent with Hyundai Engineering & Construction to build the $2.45-billion facility over 49 months. The actual EPC contract is expected to be finalized in August, and a second EPC contract for the associated water pipeline network is reportedly in the tendering process. However, the recent disagreement between the Iraqi government and ExxonMobil reflects wider uncertainty surrounding the SIIP and may portend further delays.
 
Ahmed Mousa Jiyad, an independent consultant focusing on development issues in Iraq, told Water in Oil that the seawater injection project and associated pipelines would likely move forward with delays of up to two years.
“The third quarter of this year will be very critical to know exactly how they are going to go about it, whether it’s going to be SIIP led by ExxonMobil-CNPC or if it’s going to be split into different projects with different companies doing different things,” he said. “Water injection is essential, whether it’s done under SIIP or CSSP.”
 
Additional setbacks in the urgent seawater injection project will impact other upstream players that rely on water to maintain or increase reservoir pressure, including BP and Eni. The project is necessary for Iraq to meet a production target of 6 million bopd by 2022.
 
“For every barrel of oil, Iraq needs to have 1.4-2 barrels of water injected to sustain production,” Jiyad said.
As such, some operators are forging ahead with independent plans to ensure production does not shrink. In July, BP’s president of Middle East operations said the company was weighing up options for a 2020 expansion of its Qarmat Ali water treatment plant. Qarmat Ali already has a capacity to treat 1.3 million bbl/d of industrial-grade water, mainly used for injection at the Rumaila oilfield.