Iraq Oil Potential: Recent Developments and Current Events
Bud previously presented "Iraq Oil Potential" to DGS in January 2014. Here he will discuss many of the recent devlopments in the region,including the attacks by militants in central and western Iraq and the drilling of horizontal wells in the Kurdish region.
Iraq ranks right up at the top of hydrocarbon-rich countries worldwide with the potential to overtake any country in production, according to geological consultant Harry “Bud” Holzman.
The retired Army officer and petroleum geologist has advised the U.S. Central Command on Iraq oil and gas.
In 2004, the Army placed CW4 Holzman in charge of evaluating the entire Iraqi infrastructure system, from oil and natural gas to electricity, including how to estimate what the country has and how to rebuild it. He was charged with looking at everything from refineries, pipelines, and electric power generation plants and also to determine the real hydrocarbon reserves of Iraq.
Out of approximately 89 major fields discovered to date, only 29 are producing. The others never really produced at all, yet some of these are classified as super-giant, each with over 12 billion barrels of proved reserves.
He was puzzled by the small amount of oil produced from such large reserves until he talked to some Iraqi engineers. In 2004, several informed him that they were only producing enough oil to get up to their OPEC quota of 3.5 MMBO. They could do that out of just a few fields.
Vastly Underestimated Reserves
He began his assignment by looking at the available captured data.
There were so many fields, and the first one he worked on was East Baghdad since he was living just west of the field. There were 1,100 barrels coming out of the field, and that was it. He started looking at all the data, and there were 16 billion barrels sitting under his feet. The field was an anticlinal structure 80 kilometers long and 15 kilometers wide and had 10 pays, Cretaceous through Miocene. The field could produce a million barrels a day, but the existing infrastructure could only accommodate 25,000 barrels.
After reviewing data for numerous fields and conferring with Iraqi engineers, he concluded the total amount of oil and natural gas reserves in Iraq had been vastly underestimated. He estimated with the data he had that there were 230 billion barrels for the 84 fields at the time. Since then there are a few new fields recently discovered (9-14 BBO—9 TCFG) in the Kurdish region. He started looking at natural gas reserves, especially Akkas field in the Western Desert and unexplored regions of Kurdistan, and calculated almost 200-plus trillion cubic feet (TCFG) of reserves. Other geologists put the figure closer to 350 TCFG. Most of the current gas is being flared off.
He looked at the old figures (115 BBO and 100 TCFG) and asked Iraqi engineers and Oil Ministry officials what these figures were, and they said they just gave them out from years ago. They were told to say that, and no one knew where the numbers originated. Since then, Iraq has revised its estimate upward to 150 BBO. There is good reason to believe that there is even more. One day he asked an Iraqi engineer why there were so few Permian and Jurassic tests in the south – the same reservoirs that are so productive in Saudi Arabia and Kuwait. They had so much production coming out of the Cretaceous, the engineer just said, why drill deeper. The deeper oil reserves will still be there in the future. Also, the Silurian, Jurassic and Cretaceous source rocks of Iraq will one day be the target of oil companies. Some of the source rocks have a TOC of 16-17 and cover most of Iraq.
A World Leader?
There is a huge potential for Permian and Jurassic production in the southern part of Iraq, adding that the Cretaceous, Jurassic, Triassic and Permian in the north will also be attractive. The Paleozoic, Silurian and Ordovician, will be productive in the west. There have been several recent major discoveries in Kurdistan in the last two years. Out of the 3,200 wells (mostly vertical-a few recent wells in Kurdistan and Akkas in the Western Desert are horizontal) drilled in Iraq; there are less than 400 holes drilled into the Jurassic or deeper. Most wells are less than 12,000 feet deep. There are few stratigraphic tests in the south. One day huge reserves will be found along the western margins of the Gotnia basin in southern and central Iraq, since oil migrates from east to west across the southern region.
A major obstacle to production in Iraq is the horrendous condition of the infrastructure. Most everything is broken or stolen, including pumping stations and compressors. Most of the water flood projects had broken down, especially in Kirkuk and the southern part of the country. The workers were re-injecting processed crude and residual oil back into the sands and carbonates because there was no other place for it. This procedure likely damaged the reservoirs. The other major obstacle is security, especially in the northern, western, and central part of Iraq. The security situation in the Kurdish region is considerably better. With the recent attack of the militants from Syria into Iraq, the Kurds have regained all of their former territory to include Kirkuk, one of the largest fields in the world. I do not believe that they will give it up. Even if the central government in Baghdad repels the militants, they will have to come to an agreement with the Kurds on the control of the fields around Kirkuk.
The key to Iraq is not in finding the oil, which doesn’t take a genius. A first year geologist, engineer and geophysicist could find oil in the major structural traps scattered across Iraq. In Kurdistan the geology becomes a little more complex, with plate movement and some complex faulting. There are over 400 2-D structures that have not been drilled yet. This 2-D data was accumulated by majors and the Iraq government in the late fifties, sixties and early seventies. They need an oil law. In 2007, this got bogged down in Iraqi politics and that’s where it sits today – except in Kurdistan where they formed their own oil law. The Kurdish and Baghdad governments have been discussing (fighting) over the law for years.
If Iraq gets its act together with a good hydrocarbon law and defeats the militants in the central and northwestern section of their country and brings in the service companies to repair the infrastructure, there’s no reason why the country couldn’t overtake any place in the world in production.
To put it even more into perspective, the country is the size of Texas with approximately only 3,200 wells drilled. The recent bidding process for service contracts to develop the large fields in Iraq was somewhat a success. All of the majors wanted to be involved in the future exploration of Iraq, even it means accepting marginal terms today on the development contracts. The bidding for exploration blocks was not a success, due to the poor terms offered by Baghdad. Kurdistan is doing far better in their effort to attract oil companies into their region. This is due to the PSA type of contracts offered for exploration blocks. The Kurds have just completed a major oil pipeline from their region into Turkey. This will make the Kurdish region far more attractive to oil companies, as they do not have to use a Baghdad controlled pipeline system to export their oil and gas.
They have the oil; they just need to get it out. It’s easy to get to, and the exploration costs are extremely low.
An added attraction for the rock hounds working the area: The geology is exciting.
There’s glacial in the west, deltas and salt in the south, and all the way to plate tectonics in the north. Everything in geology you’ve ever learned in school, you can use across Iraq. My thanks to Dr. Roy, Dr Freed and Dr Coppenger of Trinity University for preparing me for this task.
There are going to be great opportunities for both major and independent oil companies to become involved in both the development of current fields and the exploration for new reserves in Iraq.
Oil service companies will be needed not just to repair but also replace infrastructure and there will be a great need for up-to-date seismic and gravity surveys, given that most of Iraq hasn’t been properly explored.