Oil Production - the Heavy Lifting is Underway

By Stan Harbison, Vice President of Research and Analysis at energy consultants EPRINC.

The initial steps in new Iraqi production have been well received by the Oil Ministry, but now the heavy lifting is underway. A bevy of oil service contracts is in place. The most important work is taking place in the three large existing fields in the South. We believe that any new oil wells drilled will be very productive. But oil field developments are much more than drilling wells.

Careful “maps” of the oil reservoirs are being constructed. The most sophisticated techniques of reconnaissance are without doubt the first priority. Readings of temperature, volume and pressure in existing or test wells will be a central tool. 3-D seismic will be conducted as called for. On a more basic level, infrastructure at each field must be upgraded. This might involve replacing older pipes; it certainly requires the creation of a “digital” field in which computers have the capacity to measure and monitor all capacity.

Above all, it is certain that the operating companies are focused on building solid and capable field staffs. Many will be found either from the existing and competent South Oil Company or hired from outside Iraq. Skilled and semi-skilled workers from Iraq are being assembled to build expanded field infrastructure: good living camps, roads and new field pipelines. A rapidly developing and entrepreneurial service and support industry is underway in the Basra area. This will be an exciting development for the city. There will be new jobs and the benefits will accrue to the community.

What might slow the pace of work? We read again of difficulty of obtaining visas by required professional personnel. This has been a sore point. It reflects the constraint placed on operations by an understaffed government bureaucracy. Faster decision making processes by the government will be required if the companies are to match the demanding schedules prescribed in the contracts. Another crucial bottleneck appears to be the capacity of the main exit pipeline which brings the produced oil to the ports. This is the responsibility of the oil ministry and the government. No announcements have been made. An accelerated plan needs to be put in place.

The dramatic expansion of production is quite doable, but it is important to appreciate the challenges of the required work on the ground. We and others will be watching to see how it progresses.

Stan Harbison has been an oil and gas analyst since 1982. He has worked as a research investment analyst for a prominent US investment firm for BP, Louis Dreyfus Commodities Energy Trading and for the US. Department of Energy. He has met regularly with top managers in the world’s largest oil companies, key officials in more than ten of the world’s largest National Oil Companies and has attended many OPEC meetings. In the past year, he has devoted all of his time on Iraq’s oil development with EPRINC, (www.eprinc.org), an independent oil analysis firm in Washington DC, which provides analysis on critical emerging issues in the oil industry. Its work is read by the public, the US Congress and key US government officials.

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