Iraqi
oil reserves show great potential
Among OPEC Middle Eastern producers, Iraq holds the greatest
promise for adding substantial oil reserves and production. Reserves
may be significantly understated.
Dr. Hussain Rabia, Managing Director, Entrac Petroleum Ltd.,
Reading, UK
According to various literature, Iraq contains between 110
billion and 115 billion bbl of oil, and 112 Tcf of gas.’ These
estimates put Iraq third in a listing of global reserves, Table 1.
The 11 5-billion-bbl figure comes from OPEC sources, Table
1. However, other estimates come from well-respected international
bodies, including: 200 billion bbl by Petroleum Economist magazine, 215
billion bbl by the Federation of American Scientists, 220 billion bbl
by the Council on Foreign Relations and the James A. Baker III
Institute at Rice University and 300 billion bbl by the Centre for
Global Energy Studies and Perrolog & Associates. This last estimate
puts Iraq ahead of Saudi Arabia, implying that Iraq contains 25% of
world oil reserves. The term, oil reserves, refers to liquid oil and
gas, and not to oil sands and other solid hydrocarbons.
Variations in the above values stem from the inexact science
of reserve estimation. Reserve estimates are controlled by various
technical factors and, unfortunately, political factors. The latter are
used to increase an OPEC country’s oil reserves to enhance its
bargaining power, or, in a non-OPEC country, to attract foreign
investment. This article concentrates only on technical factors used to
estimate reserves.
In terms of reserves, most experts agree that Iraq is the
world’s last unexplored oil province, despite being a producer since
the 1930s. Since oil was discovered in the 1920s, the country has never
had a long period of political stability. This has precluded proper
planning and development of resources.
The outline below is a brief walk through Iraq’s oil history:
• 1923—First oil discovery in the Naft
Khana area
• 1939-1945— World War II; Exploration
stops, as Iraqis a British protectorate
• 1948—Zubair field discovery
• 1953—Rumaila field discovery
• 1958—Overthrow of the monarchy and
establishment of a republic state
• 1960—Law No. 80 introduced
• 1961—Implementation of above law and
suspension of IPC exploration. Law 80 is introduced, limiting
exploration in Iraq to the Iraqi National Oil Co.
• 1973—Arab-Israeli war; Iraqi oil
production is temporarily suspended
• 1981-1988—Iraq/Iran war; oil production
is interrupted. Investment in oil industry is greatly reduced. Limited
exploration drilling is carried out
• 199 1—Iraq invades Kuwait, oil
production stops
• 1991—1996—Global sanctions on Iraq
• 1996—2003—Oil for food program allows
about 2 mil— lion bopd to be sold
• 2002 (April)—Iraq suspends oil exports
for a month in support of Palestinian uprising
IMPORTANCE OF IRAQI OIL
In the US, proven oil reserves are put at 29.4 billion bbl,
and at current production rates, these reserves will only last for 10
years. In the North Sea, Britain’s revised reserves are 4.5 billion
bbls, lasting for just over five years at current production rates.
Similarly, the other major European oil producer, Norway, will see its
estimated reserves of 9.7 billion bbl used up in 8.7 years, if current
production is maintained.
The major OPEC producers—Saudi Arabia, UAE, Iran and
Kuwait—are all producing at full capacity and would require major
discoveries to substantially add to their output. The Caspian Sea
countries’ oil reserves have not met earlier expectations of being the
next, collective “Middle East.” Best estimates are now at about 47.5
billion bbl.’ Additional oil production and reserves have to be found
within the next five years, if increasing world demand (about 82
million bpd) is to be met while maintaining global oil reserves of
1.189 trillion bbl. In addition, it rakes roughly 3-5 years to put a
major oil field into hill production. There is only one country in the
world that can immediately fill in gaps, namely Iraq. {p.
124 JULY 2007 World Oil}
WARS, WARS AND NATIONALIZATION
Iraq has suffered more
than most any other nation on earth, having being governed and run for
a very long time by dictators utilizing incompetent family members,
friends and party activists to run the domestic oil industry Their lack
of expertise and foresight has largely contributed to the industry’s
deterioration. Oil revenues were never used for re-investment necessary
to improve the industry infrastructure or, indeed, used for rebuilding
the country’s infrastructure, Fig. 1. This neglect was most noticeable
in the vital, oil producing southern states.
In addition to the above, and since 1973, Iraqi governments
have entered into three major wars and have been involved in several
internal conflicts. The author emphasizes the word, governments, and
not the Iraqi nation, as these regimes were not elected and came to
power through military coups.
Perhaps one of the biggest mistakes in Iraq’s history was
nationalizing its oil industry in 1972. The then-ruling Baath parry
believed that this move would modernize the industry and put it firmly
in the hands of the Iraqi people. This thinking was largely misguided,
as foreign investment and expertise necessary for developing the
industry vanished completely, leaving Iraq entirely dependent on its
own resources.
The absence of foreign involvement in Iraq was not felt
immediately, as the price of oil went up sharply in 1973 (after the
Arab-Israeli war), allowing the country’s oil revenues to increase
substantially, as compared to before nationalization. The ruling regime
used this as a proof that nationalization really worked. Eventually, as
the oil price stabilized and revenues remained virtually the same
(allowing for inflation), it became apparent that the country could not
sustain costs of new exploration and development projects. Vast areas
of Iraq were left unexplored, and even when discoveries were found
there was no money or appropriate technology to go forward with field
developments. Parallel with this, Iraq went through two major wars
(1981-1991) and 13 years of international sanctions that prevented the
industry from being able to buy even the most basic equipment for
maintenance.
The effects of wars and bad management profoundly impacted
development of Iraq’s industry. The total number of wells in Iraq is
around 1,500. Compare this figure with a small country like Oman, where
2,600 wells were drilled during the last 20 years. In industry
terminology, large numbers of wells translate (usually) to more
production. This is particularly valid for giant and super-giant
fields, where reservoirs are too extensive (in length and width) to be
exploited by a few wells, as would be the case for a small-to-medium
North Sea reservoir.
The author believes that Iraq will one day regard
nationalization of its industry as the biggest mistake in its history
and as one of the major reasons for economic deterioration. Indeed, had
major oil companies remained working in Iraq, the regimes would not
have dared to enter into any war with Iraq’s neighbors. Accordingly the
country would have progressed and prospered in excess of the current
UAE.
TECHNICAL BACKGROUND: GIANTS AND SUPER-GIANTS
Iraq encompasses about 4
million cubic km of sedimentary rocks that are part of the Middle
Eastern Petroleum basin that contains roughly two-thirds of global oil
reserves. In Iraq, the thick sedimentary succession spans most
geological ages, from Cambrian to Recent, and contains prolific
producers requiring comparatively easy and inexpensive drilling and
development programs. The first Iraqi oil field was discovered in Naft
Khana in 1923, after an appraisal period starting in 1919.
Most experts familiar with the situation believe that the
majority of the world’s undiscovered oil reserves lie within the
sedimentary rocks of Iraq. This is because, since the early 1970s, the
majority of adjacent Middle Eastern countries had extensive seismic and
exploration drilling to delineate new reservoirs. Simply stated, the
chances of discovering new fields in other Middle Eastern countries are
very small in comparison to Iraq. This is because Iraq had some modest
seismic activity during the 1970s, but this was conducted without a
parallel program of exploration drilling to delineate and prove new
reservoirs.
Still, modest drilling has revealed the existence of
multi-source, multi-reservoir and multi-cap rocks, plus the abundance
of petroleum systems within various geological periods.2 Statistically,
over 500 seismic anomalies and geological structures were identified.
Of these, only 124 have been drilled.
In these structures, about 64 super-giant and giant oil and
gas fields were discovered. However, only 23 fields were actually
developed and put on production.2 Even in these 23 fields, the vast
majority of wells are vertical, with no horizontal or multilateral
technology employed. Furthermore, the technology employed to drill and
complete these wells is from the 1970s. Readers should note that the
literature cites 73 discovered fields. However, the author is only
concentrating on large fields for the purpose of estimating oil
reserves.
A remarkable feature of Iraqi oil reserves is the majority
lie within 10,000 ft of the surface, with 30-40% lying within
2,000-5,000 ft. The majority of oil production comes from Cretaceous
reservoirs (76%), with the remainder coming from Tertiary reservoirs
(24%). A very small amount of output (0.1%) comes from Jurassic,
Triassic and Ordovician reservoirs.3
Iraq’s exploration success rate is 2 in 3 (about 67%),
compared to the world average of 1 in 10. Moreover, oil development
costs are less than 50 cents/bbl, while other major costs are
transportation and passage. Iraq has only one outlet to the sea at
Basrah, and some of its oil passes through countries like Turkey where
transit costs are paid.
Forty-one discovered oil fields require full-scale
development, including the super-giants of Majnoon, Nahr Umr, Halfaya4
and West Qurna. Together, these discovered fields could help Iraqi
production teach 6 million bopd in the near future and possibly to 10
million bopd by 2015. It is estimated that a $4-billion investment is
required for each 1 million bpd added to capacity through development.
The present Iraqi economy would certainly require external investment.
{World Oil JULY 2007 125}
WESTERN DESERT
Notwithstanding the above,
there is still the promise of the Western Desert, which saw some
limited 3D seismic activity, to explore the area’s Paleozoic potential.
According to Dr. Sabah Mohammed,2 the majority of interpretation
studies were carried out manually until 1986, when this process was
backed up by introduction of a VAX 11-780 interpretation system, and
later by the Landmark Graphics Workstation IV.
This interpretive work resulted in hundreds of reports, and
the discovery of hundreds of seismic leads and prospects. A very
limited exploration drilling campaign revealed oil and gas in the
majority of drilled structures. Unfortunately, the Western Desert’s
full seismic results could not be utilized, as Iraq was under sanctions
from 1991 until 2003. During the sanctions, there was a severe embargo
on all imports into Iraq. In particular, imports that were chemical in
nature were banned. This policy virtually ruled out many mud chemicals
necessary for drilling and well logging. At present, it is almost
impossible to quantify the Western Desert’s reserves. However, the US
DOE estimates as much as 100 billion bbl of oil.
PRODUCING FIELDS
Iraq has around 1,500
wells, 1,000 of which are in its southern states. The majority of
production comes from four fields: Rumaila, Zubair, West Qurna
and Nahr Umar. In the North, major oil production comes from Kirkuk,
with Bai Hassan following in second place. Jambur and Khabbaz are the
only other fields producing oil in northern Iraq.
DISCOVERED BUT UNDEVELOPED FIELDS
For purposes of brevity,
discussion will be limited to just one large field that was discovered
but is not yet developed. This is Halfaya field.4
Halfaya lies in southern Iraq, and was delineated and
discovered over 25 years ago. Yet, it is considered as one of five
super-giant fields still awaiting development. Structure size is about
30 km long by 10 km wide. There is a structural closure that increases
with depth, ranging from 70 m in the Tertiary reservoirs to 190 m in
the Middle Cretaceous Mishrif reservoir, and reaching 230 m for the
Lower Cretaceous Ratawi/Yamama reservoirs.
So far, just five wells have been drilled in this
super-giant field, confirming the presence of eight pay zones, ranging
in age from Miocene/Oligocene to Lower Cretaceous, with API gravity
ranging from 21° to 31°. Main reservoir is the Mishrif group,
with a net pay thickness of over 300 m. On test, flow from the Mishrif
limestone’s reached 2,500 bopd, and 12,500 bopd from Nahr Umr, with
reservoir permeability’s reaching up to 3,500 mD. The field can produce
a minimum of 250,000 bopd.
Halfaya’s estimated total reserves in place are over 16.1
billion bbl of oil and 9.3 Tcf of gas. This clearly places Halfaya as
one of the most attractive, super-giant fields still awaiting
development.4 Developing one super-giant or giant field in Iraq can
increase oil reserves by at least 10-15 billion bbl, or 9-14% above
estimates.
Several other fields that fall in the same limbo status as
Halfaya can contribute significantly to production and reserves, Table
2. While not every discovered field will prove as large as Halfaya, one
can assume that other fields that encounter formations similar to
Rumaila, Zubair or Halfaya will be prolific producers with substantial
reserves. The most obvious development targets are the middle
Cretaceous Mishrif reservoir and the lower Cretaceous Yamama reservoir
in the southern fields; the Jurassic Najmah reservoir in Rumaila and
West Qurna fields; and the Cretaceous reservoirs in the north.
DRILLING SINCE 1981
As mentioned earlier, Iraq
has roughly 1,500 wells, of which 1,000 are in the south. Not all wells
are producers—some are injectors, observation wells and abandoned
wells. Iraq has 20 drilling rigs, of which only 10 are fit to work.
Iraq also has 16 workover rigs, but only eight are operable. The number
of wells drilled from 1991 until the beginning of 2005 is 248. For the
same period, the number of wells worked over is 655.
As will be discussed later, an integral part of assessing
reserves is to drill a large number of wells to determine the total
number and extent of reservoirs within the same field; to assess the
full flow capacity of the reservoir(s); and, more importantly, use
actual production data (materials balance equation) to confirm the
amount of oil in place. Iraq has never had the opportunity to carry out
a large drilling program to assess its huge reserves. Hence, one can
extrapolate the oil reserves from new horizons by referencing to
existing reservoirs and near-by countries containing similar formations.
Without extensive exploration that may take up to 15 years,
oil reserves cannot be assessed accurately. Critics may use this
argument to doubt any figure quoted for Iraqi oil reserves. However,
our current technical knowledge should provide us with a good enough
estimate for the purpose of future planning.
JURASSIC RESERVOIRS
In Iraq, giant reservoirs
of Jurassic age exist in fractured carbonate and dolomitized carbonate
platforms. These reservoirs are created by hot dolomitizing fluids
arising from salt beds above, and by oil creating a complex fractured
reservoir system with almost perfect sealing on all sides.5 Studies
have shown that dolomitization of reservoirs occurred simultaneously
with oil migration. Reservoir quality depends on fractures and
secondary porosity. Reservoir thickness can be up to 300 m.
The Jurassic basinal source rocks outcrop in northeastern
Iraq and southwestern Iran, and are used by local people for fuel,
mistakenly labeling these source rocks as coal. The excellent paper by
J. Goff of BP,5 on which this section was based, provides a detailed
description of these reservoirs.
These Jurassic reservoirs are deeply buried and contain very
high pressures and large quantities of H2S. They are generally regarded
as HPHT reservoirs, with bottomhole pressures approaching 20,000 psi.
The technology for developing such reservoirs is readily available from
the global industry.
Still, development of these reservoirs will be very
challenging and expensive, and will require a minimum of five years for
oil to be brought onstream. In Iraq’s current politics, observers may
argue that this delay works to the advantage of the Iraqi people, as it
provides sufficient time to develop other easily accessible reservoirs
with lesser pressures and temperatures, and fewer requirements for
advanced technology.
Generated oil in the
Jurassic reservoirs is estimated at 5-10 trillion bbl of oil, with
possible, trapped oil in place of 1-2 trillion bbl. If only 25% of the
1-2 trillion bbl is in definable accumulations, and the recovery factor
for these reservoirs is only 20%, the yield of recoverable light oil
will be 50-100 billion bbl. The 100-billion-bbl figure almost equals
the entire, current estimate of Iraqi oil reserves.
The author has chosen a very Low estirnate, to avoid accusations of
exaggerating Iraqi oil reserves. Industry professionals would agree
that the above recoverable figure could easily be doubled using modern
recovery techniques.
Evidence.
A number of deep exploration wells drilled in Kuwait’s lower Jurassic
rocks, and at least one well drilled into the Najmah formation beneath
Rumaila oil field in southern Iraq, have struck light oil. A sustained,
future exploration program will better delineate most productive
Jurassic reservoirs.
ESTIMATING RESERVES
Oil and gas reserves are established by physical methods, including
seismic, geological, drilling, logging, well resting and production
methods. By far, the most accurate method of estimating oil reserves is
based on actual production data, followed by geological estimation.
Full derails of methods of estimating reserves are available.6 Reserves
are classified in three ways:
• Proved reserves: High degree of certainty
• Probable: Lesser degree of certainty than proved
reserves
• Possible: Low degree of certainty compared to
probable.
A fourth category may be added: Prospective reserves. This category has
a very high degree of uncertainty, as no wells have been drilled in the
prospect. It is a requirement that proved, probable and possible
estimates are based on actual wells drilled in the prospect.
For each of the above classifications, a degree of uncertainty is
associated with the value to reflect the probability of recovery. The
best recoverable figures in the industry are in the Norwegian fields,
and they average at about 60%. In Iraq, the recovery factor is
estimated at around 40-45%.
In many cases, proved reserve estimates were often found to be on the
low side, and the actual reserves were found to exceed estimates. As a
rule, it is unlikely that the actual remaining reserves in the ground
exceed the sum of the proved, probable and possible reserves.
Each of the above classifications is also divided into two types:
developed and undeveloped.6 Developed reserves are those reserves that
are expected to be recovered from existing wells and installed
facilities. Undeveloped reserves are those reserves expect recovery
from known accumulations, where a significant expenditure (e.g. when
compared to the cost of drilling a well) is required to render them
capable of production.
Readers should note that proved, probable or possible reserves ate
assigned only to known accumulations that have been penetrated by a
wellbore with a well testing program. Potential accumulations that have
not been penetrated by wells are termed Prospective Reserves.6
The methods used to estimate the quantity of oil reserves ate:
volumetric, material balance and production decline analysis. The most
accurate method is the material balance, as it is based on actual
production data, and the analysis takes into consideration the
reservoir pressure behavior as hydrocarbon fluids are withdrawn. The
volumetric method is the least accurate, as it only considers rock
volume but not the mechanism of fluid flow within the reservoir, which
is essential for estimating the actual recoverable oil. Production
decline methods involve the analysis of production behavior as
reservoir fluids are withdrawn. For accurate and consistent results, a
sufficient period of stable operating conditions is required.
MINIMUM POSSIBLE RESERVES
Table 2 details Iraqi producing fields and shows proved reserve
volumes, together with depth and type of hydrocarbon. The total
estimate is around 110 billion bbl of oil.
Table 3 summarizes the statistics given in the bulk of the article, and
those given in Table 2. It shows current estimates in column 1 and
estimates from discovered but
undeveloped reservoirs it-i column 2. Here, only one field is used, to
provide minimum values for estimates.
Column 3 gives estimates for extra reserves, if FOR is used. FOR’s
influence, through the use of horizontal and multilateral technology,
can easily increase the recovery factor from 45% to 55%. This is still
well below Norway’s figure. This 10% uplift in recovery will have a
corresponding minimum increase in recoverable reserves of 11 billion
bbl (10% of 110 billion). In column 4, data were taken for possible
extra reserves, obtained from within existing fields of undeveloped
shallow and deep horizons. The estimate from this is 10.91 billion bbl,
although personal communication by the author with a number of Iraqi
oil experts indicates that this figure may be substantially higher.
In column 5, the estimate comes straight from the US DOE. The only
prospective value in this table is in column 6, referring to potential
in the Jurassic formations. If estimates from the Jurassic formations
are not included, then Iraq’s total minimum reserves are on the order
of 249 billion bbl of oil, more than twice the estimate. If one
includes prospective reserves in column 6, then Iraq’s total minimum
reserves rise to about 324 billion bbl of oil, roughly three times the
current estimate.
CONCLUSIONS
Table 3 shows that Iraqi oil reserves are substantially higher than the
quoted value of 110-115 billion bbl. At a minimum, Iraqi oil reserves
may be as much as 249 billion bbl, and perhaps as high as 324 billion
bbl. The minimum figure of 249 billion bbl is more than twice the
estimated value. Oil reserve estimates given in Table 3 make Iraq, by
far, the world’s largest
country for potential oil reserves.
LITERATURE CITED
1. BP Statistical Review of World Energy. June 2005.
2. Sabah Mohammed, expert exploration geophysicist, Ministry of Oil,
Iraq (2005), “Seismic activities in Iraq,” Iraqi Petroleum Conference
2006, London, organized by Entrac Petroleum Ltd.
3. Geodesign website information, 2005.
4. M. Al Gailani, Halfaya field, “A twenty first
super-giant field,” Iraqi Petroleum Conference 2006, London, organized
by Entrac Petroleum Ltd.
5. J. Gaff, “Origin and potential of nonconventional Jurassic oil
reservoirs on the Northern Arabian Plate,” SPE paper 93505.
6. “Definitions and guidelines for estimating and classifying oil
and gas reserves,” Jan. 25, 2002, Draft For Public Comment. Petroleum
Society of CIM, Standing Committee on Reserves Definitions, Alberta
Energy & Utilities Board, Calgary.
THE AUTHOR
Dr. Hussain Rabia is managing director of Entrac Pertoleum Ltd., a
company specializing in providing consulting and training set-vices for
the Iraqi and international oil industry. The company provides specific
advice on opportunities in Iraq, including technical studies, field
development and in-country assistance. The author has over 27 years of
experience, mainly with large international oil companies, including BC
and ADGO. Dr, Rabia has worked on many large reservoirs and on HPHT
reservoirs, He has written three books and several technical papers.
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