OPEC’s No.2 Is Planning To Develop Huge Gas Reserves

Iraq is finally pushing ahead with plans to develop its associated and unassociated gas resources over the next two to three years, according to deputy oil minister Hamed Younis last week. Overall, the Oil Ministry is reviewing projects to develop 1.2 billion standard cubic feet per day (scf / d) of the associated gas from the 2.7 billion scf / d that are produced to supplement oil production. Attempts are also being made to develop a number of stand-alone gas fields, starting with the estimated total production of 700 million scf / d from Akkas and Mansouriyah. There are three very good reasons why it should do this, but given its history of achieving goals in this area, it is a matter of controversy as to whether it will achieve anything.
The first reason is political, as there is some evidence to show the US that it intends to reduce its dependence on Iran for electricity and gas imports at a later date. As OilPrice.com highlighted, this long-standing agreement between the two countries was an equally long-lasting source of intense irritation for the United States. To make a long story short, Washington made it very clear in April that Iraq was not providing convincing evidence to the United States unless it intended to reduce its imports of Iranian electricity and gas, after the 30-day Deadline in April no longer give exemptions for Iraq.
At the same time, more names in Iraq would be added to the corresponding blacklists in connection with the multi-year sanctions that have shaped the relationship between the two countries since the original sanctions were introduced. It would also cut funding and security support and severely damage the prospects for the all-important oil infrastructure project - the Common Seawater Supply Project - without ExxonMobil being able to return. This announcement of new gas projects from Iraq is part of the assurances Baghdad has given Washington in this regard.
The second reason why Iraq should implement these gas plans is financial because the non-development of its unassociated gas fields is like leaving money in the ground. Although Iraq does not have gas reserves the size of neighboring Iran (with its oversized, unassociated South Pars resource), it has nearly 135 trillion cubic feet of gas, which is the 12th largest in the world according to the EIA, with about three-quarters of it connected. Of course, global gas prices are currently low, but this will not always be the case, and the development of the gas fields will take at least as long until the world gas price has recovered.
For the same reason, it makes sense not to flare off the gas associated with the development of the oil fields, as it is comparable to burning money that Iraq can hardly afford. Just last month, the Iraqi Economic Parliamentary Committee proposed paying international oil companies (IOCs) with crude oil instead of cash or cash equivalents to reduce short-term government spending. It has also been proposed to delay the payment of external debt, introduce a 60 percent cut in salaries for various government employees, and reduce all non-essential expenses.
Despite pumping at least 4.65 million barrels of oil per day (bpd) in February - above the OPEC + quota of 4.46 million bpd - and exporting around 3.4 million bpd of crude oil this month and almost the same In March, Iraqi oil revenues had risen by almost 50 percent at that point. This is in line with the slump in oil prices and the fact that around 90 percent of the Iraqi state's revenue still comes from oil, hence the requests to the IOCs. Worse still, there is constant disagreement between Baghdad and Erbil over the 2014 agreement that Iraq should send budget payments to the semi-autonomous region of Kurdistan in return for the oil supplies it has returned to the Iraqi State Oil Marketing Organization (SOMO). .
This financial tightening will soon pose a serious threat to Baghdad. New Prime Minister Mustafa al-Kadhimi is demanding 12 trillion IQD ($ 10 billion) in salaries for the next two months from more than four million employees, pensioners, and government employees To pay beneficiaries. and food aid for low-income families, which together make up the majority of households in Iraq. Iraqi government believes that failure to meet one of these commitments could lead to widespread protests at the end of last year.
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The third reason Iraq should implement these gas plans is a longer-term strategic strategy, since flaring gas and undeveloping unassociated gas resources means that Iraq's precious oil reserves must instead be used to generate domestic electricity. This means that the oil used to generate electricity cannot be monetized through export (even now at a much higher rate than the average elevation cost of $ 1 to $ 2 a barrel) to bolster Iraq's almost empty state coffers, and also cannot be used to support Iraq reaching the long-planned crude oil production target of 7 million barrels a day (it should be reached by 2022).
After Russia, Iraq is currently one of the three worst offenders for flaring associated gas in the world, who burned around 16 billion cubic meters last year. This not only costs the economy billions of dollars in lost revenue and contributes to the frequent blackouts in Iraq, especially in the summer months, but is also not in line with the United Nations and the World Bank's Zero Routine Flaring initiative Kind of routine to end by 2030 that Iraq joined in 2017.
In addition to the gradual development of the unassociated Iraqi gas fields of 400 million scf / d accumulators and 300 million scf / d Mansouriyah, which OilPrice.com dealt with extensively, Younis emphasized that the initial focus of the efforts related to the associated gas would be on Nasiriyah (200 million scf / d), Halfaya (300 million scf / d) and Ratawi (400 million scf / d) fall, while the remaining 300 million scf / d (out of a total of 1.2 billion scf / d) d) come from others Areas are coming.
Although he did not provide any other important details, this single announcement stems from a deal agreed in principle between Baghdad and U.S. oil service provider Baker Hughes in 2018, for 200 million scf / d from the Nassiriya and Gharraf oil fields (and other oil fields in the North) to be used by Basra) and additional businesses that were about the same time. According to a senior oil and gas industry source that works closely with the Iraqi oil ministry, this will be the broad template that the oil ministry will now follow.
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In the first phase, the advanced modular gas processing solution in the integrated natural gas complex in Nassiriya would be used to dehydrate and compress flare gas to generate more than 100 million scf / d gas. In the second phase, the Nassiriya plant would be expanded to a full natural gas liquid plant, in which 200 million scf / d dry gas, liquid gas and condensate would be recovered. The entire output would flow into the domestic power generation sector, at which time Baker Hughes said that combating the flare gas from the two fields would feed 400 megawatts of electricity into the Iraqi grid.
Around the same time that the Baker Hughes deal was announced in 2018, then oil minister Jabbar Al-Luaibi said he was in the process of negotiating a similar gas capture agreement for the Nahr Bin Umar state field with Orion gas processors based in Houston. In addition, the Iraqi South Oil Company announced that, under the same plan, it would begin building gas treatment plans in the Missan and Halfaya fields, which would have a total capacity of 600 million scf / d gas upon completion. The plan then envisaged that this would be supplemented by the construction of gas processing plants in the West Qurna, Majnoon and Badra fields with a total capacity of 1,650 million scf / d, 725 million scf / d and 85 million scf / d.
At the time, according to the Oil Ministry, it was planned that Iraq would have stopped all flaring of gas from its south-producing oil fields by the end of 2021, and that part of this gas capacity would also be released for export at that time. "If oil production reaches seven million barrels a day in the next few years, Iraq will have a surplus of around four billion cubic feet of gas that needs to be released for export," the oil ministry said.
By Simon Watkins for Oilprice.com
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