Japanese Company considers Gas Pipeline and Petchem Plant

By John Lee.

Iraq has reportedly contracted Japan’s Toyo Engineering to help build a gas pipeline to Kuwait and a petrochemical plant as Baghdad.

According to a report from Reuters, the move will help Iraq to reduce flaring and finish paying the reparations owed to Kuwait for the invasion in 1990.

The project would allow Kuwait to reduce its dependency on Qatar as a supplier of gas; deliveries could begin as early as 2019.

It would also deal a blow to Shell, which aimed to be the dominant gas player in Iraq before relations with Baghdad soured following it’s planned exit from the Majnoon oil project.

Toyo told Reuters that talks are ongoing and a final decision has not yet been made.

(Source: Reuters)

New Oil & Gas Blocks to be offered

By John Lee.

Iraq has invited international oil companies (IOCs) to bid for contracts to explore and develop nine new oil and gas blocks.

The blocks are along the borders with Iran and Kuwait, with one located in the territorial waters.

According to Reuters, the bidding terms will be finalised by the end of May, with bids to be opened on 21st June 21, 2018.

The terms are expected to be different from previous service contracts, which remunerate companies regardless of oil prices fluctuations.

(Sources: Ministry of Oil, Reuters)

New Pipeline to Export Kirkuk Oil via Ceyhan

By John Lee.

Iraq’s Oil Ministry has announced that it will build a new pipeline from Baiji to Fishkabur, enabling Kirkuk oil to be exported again from Turkey’s Ceyhan port (pictured).

Kirkuk’s oil was previously being exported via the Kurdistan Regional Government’s (KRG) pipeline to Ceyhan, but this has been on hold since Baghdad took control of the area.

Plans to rehabilitate Baghdad’s existing oil pipeline to Turkey, which was badly damaged by militants in 2014, have been scrapped.

(Sourced: Ministry of Oil, Rudaw)

BP, Eni “interested in Majnoon Oilfield”

By John Lee.

Reuters has reported that both BP and Eni have expressed an interest in developing the giant Majnoon oilfield, which Shell plans to exit next year.

Iraqi oil officials told the news agency that Iraq’s Ministry of Oil has not yet started negotiations with either company.

BP is currently developing the Rumaila field, while Eni operates Zubair.

Shell is expected to hand over Majnoon operations to the state-owned Basra Oil Company by the end of June 2018.

Both Chevron and Total have been previously reported as being interested in taking over the field.

(Source: Reuters)

BHGE to supply Generators for Halfaya Oilfield

Baker Hughes, a GE company, has signed an agreement for the provision of turbine generators to PetroChina International Iraq, in the biggest Turbomachinery & Process Solutions (TPS) agreement ever between the two companies. 

BHGE will deliver its Frame 6B gas turbine electric generator trains to support power generation for the Halfaya oilfield located in the Maysan Governorate. The equipment will generate 150 MW of power for the project and leverage support from BHGE’s existing local and global workforce. The components of the turbo generator units will be manufactured and assembled at BHGE’s Nuovo Pignone facility in Florence, Italy.

Rami Qasem, President & CEO of MENAT & India, BHGE, said:

This deal strengthens our local footprint in Iraq and further demonstrates our dedication to the region where we see great promise and have formed strong partnerships through ongoing projects and the development of local skills.

“The provision of our field-proven turbomachinery solutions enables international operators around the globe to safely and stably operate, all while reaching their oil production targets and staying on schedule. This is especially true for this particular contract, as our turbines will provide reliable and efficient energy to the Halfaya field and further support the sustainability of Iraq’s ongoing oil and gas operations.

BHGE’s Frame 6 turbines are able to operate in extreme conditions and harsh environments across a wide range of applications, and have been proven and tested with more than 55 million operating hours.

The turbines are designed to be fully fuel flexible, possessing the ability to run on a wide range of gas or distillate liquids, including sour gas. This offers valuable cost saving to customers, as the turbines can run on the most economically available fuel for a given operation.  In addition to the Halfaya contract, the turbines have been used in multiple projects in the region.

The Halfaya oilfield was discovered in 1976 with 4.1 billion barrels in reserves and is situated in the southern part of Iraq in the country’s Maysan Governate. The field, operated by PetroChina International Iraq, currently produces approx. 200,000 barrels per day.

This agreement with PetroChina International Iraq further strengthens BHGE’s presence in the country, where it has contributed to several projects, including power generation support for two of Iraq’s largest fields – West Qurna and Rumaila – and retains a local footprint consisting of over 70% Iraqi employees.

BHGE also owns and operates a technical services facility in North Rumaila, which opened in 2013 and was expanded this summer. The facility offers a wide range of testing, repair and refurbishment services and has helped to create local employment opportunities and training for more than 2,000 Iraqi professionals.

(Source: BHGE)

AISSOT first Crude Oil Shipment from Iraq

Following from the recent launch of its new Iraq-based bunkering operation, Al Iraqia Shipping Services and Oil Trading (AISSOT) has announced its first shipment of crude oil from Iraq.

The company said it shipped its first 2 million bbl of crude oil on their very large crude carrier MT Basra (pictured) on November 18, “successfully completing its first loading out of Iraq ever since the end of war in Iraq.

AISSOT, a joint-venture company of Iraqi Oil Tankers Company (IOTC) and Arab Maritime Petroleum Transport Company (AMPTC), says it now plans to become a leading crude oil carrier for OPEC’s second-largest producer by acquiring 80 tankers.

(Source: AISSOT)

Iraq’s Southern Oil Exports “Close to Record High”

By John Lee.

Reuters reports that oil exports from southern Iraq have risen to close to a record high.

It cites industry sources as saying that exports in the first 20 days of November averaged about 3.50 million bpd, up 150,000 bpd from October’s average.

The current monthly record of 3.51 million bpd was achieved in December 2016, immediately before an OPEC cut took effect.

The news agency says that exports from Iraq’s northern fields have averaged around 250,000 bpd month to date, down from an estimated 450,000 bpd in October and more than 500,000 bpd earlier this year.

(Source: Reuters)

Baghdad Increases Pressure on KRG with Budget Cut

By Omar Sattar for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News. 

The first draft of Iraq’s federal budget for 2018, approved by the government at the start of the month, envisions slashing the Kurdish region’s share from 17% to 12.7% of the total.

The cut is one of several “punitive” constitutional measures that followed the Sept. 25 Kurdish referendum on independence. Those measures also saw Baghdad seize control of disputed areas, border crossings and air bases, and demand that the Kurdistan Regional Government (KRG) transfer taxes and other public revenues to the central government.

This is the first time that the KRG’s share of the budget has been subject to review since 2005, when the government of then interim Prime Minister Ayad Allawi allocated 17% to the Kurdish region, despite the fact there has not been an official census in Iraq since 1997.

“There have been no negotiations so far with Baghdad on the budget or other pending issues, despite the KRG’s desire for talks,” said parliament member Najiba Najib of the Kurdistan Alliance. “The central government is still refusing to receive the Kurdish delegation.”

“Iraq still doesn’t currently have official statistics,” she added. “Even data from the Ministry of Trade is inaccurate. It’s not reasonable to believe that the population of the Kurdish region has stayed at just 5 million, as the United Nations said in 2003 when it recommended the KRG receive 13% of the national budget.”

She said the central government has felt “arrogant and powerful” since it regained control of Kirkuk.

SOMO Awards Diesel Tenders

By John Lee.

Sources have told Reuters that China’s state-run Zhenhua Oil will supply diesel (500 parts per million (ppm) sulphur) to Iraq’s State Oil Marketing Organization (SOMO) through a term contract for the first time.

It will supply 600,000 tonnes of the 2.37 million tonnes sought by SOMO in a tender for delivery in the 2018 calendar year.

The company is part of defence conglomerate China North Industries Group Corp (NORINCO).

BB Energy, Litasco (the international marketing and trading arm of Russia’s Lukoil) and Lima Energy (a joint venture between Litasco and SOMO) will also supply about 25 percent each.

(Source: Reuters)

ShaMaran Petroleum Announces Results

ShaMaran Petroleum has announced its financial and operating results for the three and nine months ended September 30, 2017. (Unless otherwise stated all currency amounts indicated as “$” in this news release are expressed in thousands of United States dollars).

HIGHLIGHTS AND DEVELOPMENTS

Operations

  • Oil production on the Atrush Block commenced in July 2017. Atrush is currently producing at approximately 26 thousand barrels of oil per day (“bopd”). In order to address certain production constraints the facilities were shut down in the beginning of October. These constraints have now successfully been resolved.
  • One of the four production wells, Atrush 4, (“AT-4”) is currently shut in. The well was back-producing drilling fluid lost during drilling operations. In order to not upset the production system it was decided to clean up the well via temporary facilities upon the receipt of a flare permit from the Kurdistan Regional Government (“KRG”). This operation is now planned for Q4 2017.
  • In October and November 2017 the Company received payments totalling $2.5 million representing its entitlement share of the $9.7 million in total payments received by the Atrush Non-Government Contractors from the KRG for July and August oil sales from Atrush and reimbursement instalments of the Atrush Exploration Costs receivable. 703 thousand barrels of oil were exported from Atrush for the months of July and August with an average netback price1 of $35.3 per barrel of oil. Total oil produced and exported from Atrush over the third quarter was 1.3 million barrels resulting in an average of 14.6 thousand barrels per day. The average netback price over the quarter was $36.86 per barrel and the average lifting cost was $8.54 per barrel.
  • The Chiya Khere-7 (“CK-7”), which was spudded on September 17, 2017 reached a final depth of 1,861 metres in early November 2017. The reservoir section was encountered approximately 114 metres shallower than prognosis. The well was drilled on time and under budget. Testing and completion of the well will be performed in 2018 to coincide with installation of flow lines between the Production Facility and the Chamanke E location were the well is located. The main objectives of the well are to appraise the commercial potential of the Mus formation, to help reduce the uncertainty in the location of the medium to heavy oil transition zone and to serve as a further producing well.
  • In September 2017 an agreement was concluded between the Atrush Non-Government Contractors and the KRG for the sale of Atrush oil whereby the KRG will buy oil exported from the Atrush field by pipeline at the Atrush block boundary based upon the Dated Brent oil price minus approximately $16 for quality discount and all local and international transportation costs. This discount is based on the same principles as other oil sales agreements in the Kurdistan Region of Iraq.
  • The Final Completion Certificate for the Atrush Feeder Pipeline (“FCC”) was issued on October 31, 2017 which completes the obligation of the Non-Government Contractors to fund the KRG’s share of development costs and triggers the commencement of repayment of both the Atrush Feeder Pipeline Cost Loan and the Atrush Development Cost Loan. The first loan repayment instalments are due later in November 2017.
  • Following the independence referendum held in Kurdistan on September 25, 2017, operations in the Atrush field in Kurdistan are continuing in a normal, safe and secure manner. Exports from Atrush are continuing via the Kurdistan Export Pipeline system and drilling operations on the CK-7 well are progressing as planned. Nevertheless, events since the referendum suggest an increase in the potential for political instability within the region.

1 This includes a discount to Dated Brent for oil quality and all local and international transportation costs.

Corporate

  • On January 30, 2017 the Company completed the issue of 360 million common shares of ShaMaran on a private placement basis (the “Private Placement”) at a price per share of CAD 0.10 (equal to SEK 0.67) which resulted in gross proceeds to the Company of $27.3 million ($26.4 million net of transaction related costs). Zebra Holdings and Investments SARL, Lorito Holdings SARL and Lundin Petroleum BV, the Company’s major shareholders, subscribed for 43,463,618 shares, 16,984,621 shares and 17,800,000 shares, respectively, in the Private Placement.
  • In February 2017 the Company reported estimated reserves and contingent resources for the Atrush block as of December 31, 2016. Reserves and resource estimates have remained unchanged from those reported for the prior year. Total discovered oil in place in the Atrush Block is a low estimate of 1.5 billion barrels, a best estimate of 2.1 billion barrels and a high estimate of 2.8 billion barrels, with Total Field Proven plus Probable (“2P”) Reserves on a property gross basis estimated at 85.1 MMbbl and Total Field Unrisked Best Estimate Contingent Resources (“2C”) on a property gross basis estimated at 304 million barrels oil equivalent (MMboe). 2 3

2 “MMbbl” means million barrels and “MMboe” means million barrels of oil equivalents. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 million cubic feet (“Mcf”) per one barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

3 This estimate of remaining recoverable resources (unrisked) includes contingent resources that have not been adjusted for risk based on the chance of development. It is not an estimate of volumes that may be recovered.

OUTLOOK

Operations

In the fourth quarter of 2017 it is planned to produce the AT-4 well until clean via temporary facilities and bring Atrush production up to the facilities’ design capacity of 30,000 bopd.
Plans for Atrush for 2018 include:
continue with program to identify bottlenecks in order to maximise output from the Production Facility;
testing and completion of the CK-7 well;
install the CK-7 flow line and bring CK-7 into production;
drilling, testing and completion of Chiya Khere (“CK-10”), a sixth development well;
drilling and completion of Chiya Khere (“CK-9”), a dedicated water disposal well; and
conducting extended testing of the CK-6 well which is located on the eastern side of the Atrush Block and which is outside the 2P reserve area of Atrush. This would involve the installation of temporary production facilities near the Chamanke–C well pad and the delivery by truck of oil to the main Phase 1 Production Facilities.
Following the results of the CK-7 and CK-10 wells, the extended well testing in CK-6 and sustained production from the Phase 1 Production Facilities the Company expects to be in a position to further assess the significant undeveloped Atrush resource base.
The political situation in the Kurdistan region will be monitored continuously and the market will be appraised of any material impact on operational activity.