As Iraq and Kuwait forge ahead with their political rapprochement and the demarcation of their international boundaries, a major milestone will be achieved once an agreement is reached on the joint oil fields that straddle the border between the two states. That’s where Iraq needs all its resources to settle the issue in a manner that preserves its sovereignty and safeguards its interests in a way that does not lead to further claims and counter claims in the future. That’s a task that does not involve just the politicians. In fact, it requires more oil expertise than politics in order to lay the best foundations of the future unitization agreement. What you put in such an agreement would define the future relations between the two countries for decades to come.
The memorandum of understanding that was reached between the two sides stipulates, as announced previously, that an international consultant would be appointed to carry out a jointly-financed study, based on which Iraq and Kuwait would opt for a joint, coordinated development of the border oil fields.
The agreement raises several challenges, the first of which is the definition of joint oil fields. For example, is the whole of South Rumaila field a joint field whose extension on the Kuwaiti side is Ratqa field, or is it just the most southern dome – also called Ratqa sector in Iraq – that straddles the border? The same applies to the Safwan field on the Iraqi side, or Abdalli on the Kuwaiti side. For Iraq, Safwan is the fourth dome of the Zubair oil field in Iraq. Though only those two fields are mentioned in public statements, Iraqi oil experts who studied the geology of the border fields say East Abdalli on the Kuwaiti side is an extension of the Umm Qasr structure norther of the border.
Another challenge is what reservoirs does one include in the joint development? Kuwait currently produces the Fars reservoir which is not developed in Iraq, and possibly also, according to Iraqi reservoir experts, deeper reservoirs, while the Zubair reservoir is produced by both. This raises issues of equitable production, both past and future.
Most crucial of all, is perhaps the challenge of joint development under a unitization agreement at a time when the South Rumaila field is contracted to BP under a 20-year service agreement. Whatever reservoirs have not been developed in the past by Iraq, either due to their less prolific nature or to their depth, form part of the economics of the Rumaila service contract.
The development of fields through cooperative rather than competitive mechanisms has for advantage ensuring the maximum recovery of hydrocarbons from those joint fields in a most efficient manner. This makes a unitization agreement with Kuwait, as well as with other neighbors, a shared interest.
The exercise that the two states are about to embark on might not lead to the classical joint development unitization of the two segments of the field by one operator, one Iraqi reservoir engineer tells me, but rather to the establishment by the third party to be agreed on, of the current status of the field including the movement of oil across the border. The result could be an observation mechanism of wells on both sides of the border once the data is collected and each side’s share is established. This would lead to the creation of a solid foundation for cooperation between the two countries for producing joint fields to the best benefit of both, without suspicion and allegation of overproducing, irrespective of reservoir size or stage of development.
Glad to see a conscientious journalist reminding the governments and the oil technocrats of a task that might best be settled by the politicians but still requires the professional legal and technical expertise to: ensure getting the definition and equity right and to include into unitization plan – for the purpose of optimum production at the least unit cost – all the common producing multi-reservoir geological formations of the field: the ones that are commonly being produced, the ones that might have been unilaterally produced as well as the ones that will be developed and produced in the future, which might have been missed or deterred for economic reason by either side; and the ones that shall be discovered upon deepening.
Tariq Shafiq
The issue of producing shared or joint fields that straddle borders between Iraq and its neighbors is not new, actually it’s several decades old. The first example was the case of Naft Khana and Naft Shah oil fields, the names are for the parts of a single anticlinal structure extending across the border between Iraq and Iran. Many other examples are present such as the Dahlaran-North Abu Ghirab and Fauqa joint oil fields straddling the borders between Iran and Iraq. Those three examples are for oil fields developed and produced independently in each country without coordination, cooperation and of course unitization. This status of independent development and production has also prevailed in the case of joint bordering fields as they are named in Iraq, the South Rumail-Ratqa and Safwan-Abdali with Kuwait which have been mentioned by Ruba Husari.
Tariq Shafiq is right in addressing both the politicians and oil technocrats. I say this based on the bitter experience of the past years when Iraq and its oil rich neighboring countries had to compete in the development of their parts of the joint oil fields. Oil technocrats had to work under pressure, lack of information about the extent and properties of the field on the other side, and most important lack of knowledge of its development plan and actual production level. This of course resulted in un-optimum development whether in terms of recovery, cost or efforts spent. It posed an awkward situation to the oil technocrats where preservation of Public Property, i.e ”Oil”, was at stake as a result of migration of oil from one side to the other. The situation was further exasperated because of the abnormal environment that prevailed most of the time, especially during the eight years of the Iraq-Iran war during which availability of resources became scarce with time, thus limiting oil operation on the Iraqi side. Oil activities on both sides became a source of friction that escalated in 1990 and became a volatile factor leading to the deterioration of relations between Iraq and Kuwait. In short, independent development of joint bordering oil fields led to tension in relations with lamentable consequences. Hence, the call on politicians to settle and solve this task stems from the wisdom that cooperation and coordination is the alternative win-win solution to competition. It could lead to strengthening of relations on one hand, and an optimum development of the shared fields on both sides of the border, on the other.
Thamir A.Ghadhban