Tariq Shafiq on Iraqi Oil Reserves

Another interesting reference on Iraqi Oil Reserves (besides the al-Mehaidi report I already mentioned) is Iraq Oil Development Policy Options: In Search Of Balance by Tariq Shafiq from December 2003 (ie about 9 months after the US invasion). According to the article,

Tariq Shafiq is a petroleum engineer who was Vice President and Executive Director of the Iraq National Oil Company (INOC). Recently he was the leading researcher and coordinator for a Petrolog & Associates study on Iraq’s exploration and production capacity, in a joint venture with the Centre for Global Energy Studies

Here are a few excerpts of interest

In 1966, the Iraq National Oil Company (INOC) carried out a study of potential oil reserves covering an area of approximately 215,000 sq km south of the horizontal line at the center of the country and to the south, but excluding the major producing fields of Rumaila and Zubair. The information and data were derived from the records of IPC and its associated companies (BPC and MPC). A total of 301 anomalies were identified, mainly by gravity and some seismic surveys. Of these, only 135 anomalies were considered sufficiently credible. Aided by their geological settings and by probability analysis, the oil-in-place of the Tertiary and Cretaceous age was estimated at 350bn barrels and potential recoverable oil reserves at 111bn barrels.

In 1994, I presented a paper at a geological oil conference in ΄Amman, Jordan, and developed it further a few years later for an oil conference at the Centre for Global Energy Studies, in London (CGES). I utilized an empirical relationship, which relates the discovered oil in a geological basin to the exploration effort along a time-scale. It demonstrates that exploration effectiveness starts low at the initial phase, then picks up sharply and grows almost linearly until the bulk of the reserves are discovered, when it slows down as the ultimate reserves of the basin are reached.

In Iraq, there are some 530 structural anomalies that have been identified by geophysical means. Of these, only 114 have been drilled and, by 1994, oil was established in 73 structural anomalies. I estimated the total ultimate oil reserves housed in these 73 enclosures to be in the order of 144bn barrels, which is in conformity with published data and the experience of Iraqi experts. With the use of size distribution and varying success ratios, the potential oil reserve was estimated to be in the order of 280bn barrels to 360bn barrels, housed in 143 to 183 structural anomalies.

In a further joint study with CGES on Iraq published in 1997 (Oil Production in the Gulf Volume IV), the Petrolog and Associates team – involving myself and others amongst the most experienced petroleum engineers and geologists – carried out an extensive analysis of Iraq’s exploration potential, taking over three man-years. The proven ultimate oil reserves were estimated at 128bn barrels, housed in 80 fields, of which 124bn barrels were housed in 43 discovered fields. The remaining 37 fields have been discovered but not sufficiently delineated. Each has been assigned only 0.1bn barrels. Iraq’s potential reserves were estimated conservatively to be in excess of 216bn barrels. These are large fields with as much reserves as in some of the discovered fields. The largest eight fields housed some 50bn barrels, compared with 92bn barrels housed in eight discovered fields. Our estimate was based on conservative volumetric calculations, using average porosity, oil shrinkage and a recovery factor not exceeding 31% for the oil reserves recoverable from 224 anomalies, among the total of 440 surface and sub-surface identified anomalies which are sufficiently prospected to be included. The potential proven reserve was estimated at 455bn barrels, to which a success rate of 47.5% was applied (being the average of 70% terminating at 25% at the end of the exploration period), giving 216bn barrels of proven reserves. On the basis of the above results, we endorse estimates of an ultimate proven reserve of 140bn barrels and a potential reserve of 215bn barrels, as reported here.

and

Iraq, like all the major oil producers in the Middle East, has been producing oil reserves at a depletion rate of around 1%. The practice was inherited from the concession era when the multinational majors had the oil reserves to produce multiples of the market demand. The companies then, however, had virtually a monopoly over the oil-integrated operations and in order to maintain a stable crude oil price they had to adopt a low depletion rate. They also had to satisfy all their host countries and hence adopted low depletion rates in each country.

The nationalized era seems to have inherited the practice and took on itself a policy of crude oil stabilization with the aid of OPEC, by regulating production. In the meantime, the multinational oil companies and their partners in the non-OPEC countries had to go into much higher depletion rates in order to enhance payback and return on their investment, particularly, in view of investing in higher cost oil countries.

The 2001 depletion rates of the major producers were: North Sea, 18% (UK) and 8% (Norway); the Russian Federation 5%; North America, 9% (USA), 11% (Canada) and 5% (Mexico).

Adopting a depletion rate for Iraq of 4-5%, which is well within good reservoir management practice for large fields, would permit increasing Iraq’s production rate to a peak of 10mn b/d, maintaining it for nine years and then allowing a natural decline. At the end of 25 years, the production rate would be 6.4mn b/d, but the reserves would have declined to 42bn barrels from its current level.

On the same basis of maintaining a depletion rate of 4-5%, Iraq can lift the 10mn b/d plateau to 12mn b/d, and maintain it for eight years provided that 60bn barrels of additional new discoveries are added. This represents only 28% of the likely potential reserves. The plateau could be maintained for eight years, as new reserves are ploughed in at the rate of 3bn barrels per year starting on the seventh year. By the end of the 25th year, production would have reached 11mn b/d and remaining 88bn barrels.

With the world’s annual incremental increase in consumption in the order of 1mn b/d, it would take Iraq a good many years to require a production capacity as high as 10mn b/d. As a result exploration for new potential could very well be deferred.

Clearly exploration for additional reserves is less of a priority than the most pressing one of restoration and rehabilitation, followed by production capacity growth at rates commensurate with market forces, and Iraq’s need for capital for its economic and social development.