Once again, the results of Iraq’s first bid round proved that access to Mideast oil comes at a premium to international oil companies. Call it an entry fee for securing a foot in this vast oil hub. The prize is the giant Rumaila fields which despite producing since 1954 for South Rumaila and 1972 for its northern extension, still carry a huge potential but not without challenges.
Oil in place in North Rumaila is put at some 31 billion bbl with only just over 3 billion bbl produced so far, while it’s close to 30 billion bbl in South Rumaila despite having produced three times its northern part. Recoverable reserves of both fields is put at over 17 billion bbl. Mishrif is the biggest reservoir in North Rumaila accounting for over 70% of its reserves, while Main Pay takes center place in the South Rumaila reserves. Mishrif and Main Pay are the main producing reservoirs in the north and the south in addition to Upper Shale Member in South Rumaila.
A hidden prize is the discovered but undeveloped reservoirs. These are Nahr Umar, Upper Shale Member, Yamama, Najma, Alan and Mus/Adaiya in North Rumaila and Lower Fars, Nahr Umar, Fourth Pay and Yamama in the south. According to the producing field technical service contract (PFTSC) that BP-CNPC will sign soon, the consortium shall appraise these reservoirs and may develop them and put them in production under the same contract but not the same terms. A new remuneration fee has to be agreed for the development of these reservoirs within the first 9 years of the contract or six years from the completion of the initial 3-year rehabilitation plan. In the case of non-agreement, it will have to relinquish those reservoirs to South Oil Co to develop them itself. Another hidden prize is the undiscovered potential reservoirs. The consortium has a six-year long exclusivity from the effective date to negotiate a separate agreement to explore for more reservoirs and develop them.
But the challenges for BP-CNPC are also big. The consortium has to pay a $500 million reimbursable signature bonus within 30 days of the effective date and has a minimum expenditure commitment of $300 million to carry out the minimum work obligation in the Rumaila fields. The minimum work obligation under the appraisal program includes acquiring, processing and interpreting 1,500 square km of 3-D seismic survey over the two fields’ area and prepare the much needed geological and reservoir engineering studies and 3-D simulation for the reservoirs. Under the rehabilitation minimum work obligation, it should drill 30 new wells of which 20 are producers and workover 130 wells including installing submersible pumps and perform 100 stimulations, carry out a thorough reservoir surveillance plan, build water injection plants in addition to refurbishment work on the existing facilities. The Rumaila fields are vast (about 1,100 square km) with 10 degassing stations already spread over the two fields currently producing 950,000 b/d.
Yet, BP has a major advantage where its early engagement with the Iraqi oil ministry since 2003 will now pay off. In 2005 it signed a contract to remotely carry out a reservoir study for the Rumaila fields for the ministry and by the time the study was completed it had already concluded that it can easily double the fields’ output which were producing over 1 million b/d then and had produced 1.2 million b/d in early 2003.
Baghdad – July 7, 2009