Iraqi oilfield target is raised

Iraq revised its oil reserves to 143 billion barrels after a reappraisal of its oilfields.

ExxonMobil and Royal Dutch Shell have raised their target for oil production from Iraq's West Qurna-1 oilfield by about 22 per cent to more than 2.8 million barrels per day (bpd), a volume equal to the total output capacity of Abu Dhabi.

The adjustment follows extensive reservoir appraisal and surveying work on the oilfield in the year since the Iraqi oil ministry awarded a 20-year contract to the companies to develop the field, which is among the largest in the Middle East.

The resulting increase in estimated reserves at West Qurna contributed a large portion of the 24 per cent upward revision in Iraq's total oil reserves to 143 billion barrels that the oil ministry announced in October. A reappraisal of reserves at another field, Zubair, contributed most of the rest.

"The reserve and production capacity results show the huge upside potential that can be achieved relatively easily and quickly through the application of modern technologies," said Samuel Ciszuk, the senior Middle East energy analyst at IHS Global Insight.

"What has thus far been known about Iraq's vast existing reservoirs is largely based on technologies used in the 1960s and early 1970s, but there have been incredible technological leaps since then.

"Using the latest technologies, ExxonMobil and Shell have been able to quickly discover and firm up greater recoverable resources, with the certainty now allowing them to expand their production capacity target by 500,000 bpd."

The credibility of the Iraqi oil ministry's update has been improved by the companies' decision to include additional West Qurna reserves in their work plan, said Mr Ciszuk. Analysts were initially sceptical about the revision, regarding it as premature.

However, further boosts to government estimates of total Iraqi oil reserves now seem likely as other international oil producers ramp up their work programmes.

"ExxonMobil and Shell are some of the first companies to show that what a lot of the industry suspected about the Iraqi upside oil reserve potential is indeed true," said Mr Ciszuk. "Modern development and reservoir assessment techniques are able to firm up reserves at a much higher level than previously thought, while modern drilling and production technologies are able to produce from layers that Iraq's national oil industry has not been able to reach."

The West Qurna-1 field was estimated to contain about 13 billion barrels of oil reserves before ExxonMobil and Shell started their appraisal programme. The revised figure has not been disclosed.

If all the oilfields for which Iraq has awarded contracts were developed according to plan, its production capacity could reach 13 million bpd "some time after 2017", Mr Ciszuk calculated. That would exceed Saudi Arabia's 12 billion bpd capacity to pump crude.

But most analysts predict the path of Iraqi oil development will be much slower than the ministry's plans, not least because of construction bottlenecks. IHS Global forecasts a "best-case scenario" of 6 million bpd by 2020.