Iraq is important to world energy markets because
it holds more than 112 billion barrels of oil - the world's
second largest reserves. Iraq also contains 118 trillion cubic
feet of gas. In addition to Iraq's
high potential oil production capability, the country is a focal
point for regional security issues.
In June 1997, the U.N. Security Council renewed U.N.
Resolution 986, which allowed Iraq to sell $2.14 billion worth
of crude oil during the six month period between January and June
1997. About $1.1 billion of the revenues generated during these
six-month period were allocated for the purchase of humanitarian
supplies for distribution in Iraq under the U.N. supervision.
The remaining proceeds is partly used to pay compensation for
Gulf War victims ($497 million), pipeline transit fees for Turkey
($140 million), and the U.N. special commission that is attempting
to dismantle Iraq's
capability to produce weapons of mass destruction.
During the January to June 1997 period, Iraq sold
an average of 665,000 barrels per day (b/d) of crude oil. An estimated
57 percent of this oil flowed through the Iraq-Turkey pipeline,
conforming to the U.N. Resolution 986 mandate that at least half
of the "oil-for-food"
exports must transit through Turkey. Due to the recent fall in
world oil prices, Iraq will likely sell more oil during the upcoming
renewal period. Following the U.N.'s
June 1997 renewal of U.N. Resolution 986, however, Iraqi Ambassador
to the United Nations Nizar Hamdoon confirmed prior rumors that
Iraq would not proceed with signing any new sales contracts until
delays in the distribution of humanitarian aid from the last six-month
sale had been resolved. At that time, Ambassador Hamdoon also
stated that Iraq had only received 40 percent of the food and
medical supplies it had ben promised under the sales agreement.
He added that although sales contracts and pricing structures
might not be finalized until July 1997, Iraq would be able to
reach the $2.14 billion sales limit by exporting increased volumes
during the second half of the six-month renewal period. In early
May 1997, a U.N. spokesman stated that about a quarter of the
2.2 million tons of food and aid had been transported to Iraq.
The bulk of food shipments arrive at the Umm Qasr bulk terminal
in the Gulf. In June 1997, Iraqi opposition leaders stated that
the Iraqi government was stopping deliveries of U.N. humanitarian
assistance to Shiite groups in southern Iraq.
In the recent past, Iraqi officials have stated their
hope that U.N. Resolution 986 will lead to a lifting of U.N. sanctions
on Iraq. However, permanent U.N. sanctions will continue indefinitely
until Iraq fully complies with a number of resolutions. Resolution
687 is one of the most important of these and stipulates that
Iraq must destroy all of its weapons of mass destruction. In May
1997, the U.N. Security Council completed its most recent 60-day
review of Iraqi sanctions -- its 37th since 1990 --
and voted to maintain sanctions. This decision was largely made
because of continued Iraqi attempts to block U.N. inspection teams
from conducting site investigations and the substantial evidence
that Iraq still is hiding chemical and biological weapons and
a missile program.
Iraq's
continued isolation from the international community has resulted
in severe economic hardship for the country's
citizens. According to independent estimates, Iraq's
real gross domestic product (GDP) in 1993 was equivalent to 1962
levels. However, since Iraq's
population has tripled since that time, real GDP per capita in
1993 was equal to that of the 1940s. The combination of U.N. restrictions
on foreign imports as well as the lack of foreign currency derived
from oil exports have strained Iraq's
industrial and agricultural sectors, which are attempting to meet
rising domestic demand. In 1995, inflation was estimated at 75-100
percent. High inflation also was accompanied by high rates of
unemployment and underemployment, all of which made the average
Iraqi citizen's
ability to purchase food and staple goods more difficult. A recent
World Health Organization report stated that since 1990, health
standards inside Iraq have been set back 50 years.
Since the Gulf War, Saddam Hussein has maintained strong control over the country's political and military organizations. However, rising political discontent with his regime has been apparent during the last two years. In August 1995, two leading Iraqi military and intelligence officers defected to Jordan. (They were later killed after returning to Iraq.) In December 1995, Saddam Hussein's oldest son, Udai, was shot numerous times while in an upscale section of Baghdad. In June 1997, he left a hospital after a six-month recovery period on crutches, dispelling the widespread belief that he had been paralyzed below the waist. In May 1997, Major General Ahmed al-Dulaimi was reportedly killed by assassins while on his way to work in Baghdad. As a senior air defense chief, he would be the highest ranking Iraqi official killed by opposition groups to date, if the report is true.
The Kurdish regions of northern Iraq have been a
continuing source of turmoil during the past several years. In
1994, the two main rival groups controlling the semi-autonomous
Kurdish region signed a peace pact aimed ending the factional
infighting which has killed an estimated 4,000 people since 1991.
In early 1995, however, fighting resumed between the Kurdistan
Democratic Party (KDP) and the Patriotic Union of Kurdistan (PUK).
During this time, the Turkish military has made significant incursions
into Kurdish-held territory in northern Iraq. These Turkish offensives,
which have begun in May of each of the last three years, typically
involve tens of thousands of troops. Their targets typically are
Kurdish Worker Party (PKK) bases in Iraq that are used to supply
that separatist group's
activities in southeastern Turkey. With respect to the most recent
Turkish offensive begun in May 1997, a U.S. State Department spokesman
said that the United States supported Turkey's
actions because of that country's
legitimate need for self-defense against Kurdish terrorist groups
operating in its southeastern region.
OIL
Iraq contains 112 billion barrels of proven oil reserves,
along with roughly 215 billion barrels of probable and possible
resources. Iraq's
oil resources are the world's
second largest, exceeded only by those found in Saudi Arabia.
Iraq's
proven oil reserves are located in 73 structures, including at
least 6 super-giant, 17 giant, and 20 large fields. Only 15 of
these 73 structures have been developed, and currently producing
fields contain about 40 percent of total proven reserves. Iraq's
true resource potential may be understated, as recent advances
in horizontal/multilateral drilling and enhanced oil recovery
likely will increase recovery rates and raise total recoverable
reserves. In addition, most of the exploration and production
activity to date in Iraq has occurred at the Cretaceous level.
Deeper oil-bearing formations at the Jurassic and Triassic levels
could yield additional resources.
Iraqi oil reserves vary widely in quality, with API
gravities in the 24o to 42o range. Iraq's
main export crudes come from the country's
two largest active fields: Rumaila and Kirkuk. The southern Rumaila
field produces three streams: Basrah Regular (34o API,
2.1 percent sulfur); Basrah Medium (30o API, 2.6 percent
sulfur); and Basrah Heavy (22o-24o API,
3.4 percent sulfur). The northern Kirkuk field produces 37o
API, 2 percent sulfur crude. An additional export crude, known
as "Fao Blend",
is heavier and more sour, with a 27o API and 2.9 percent
sulfur. Following post-U.N. sanction development of South Rumaila's
Yamamah formation, Iraq plans to export up to 800,000 b/d of "Basrah
Light"
(35o-40o API).
Prior to its invasion of Kuwait in August 1990, Iraqi
oil production had just recovered from the costly Iraq-Iran War.
For the month of July 1990, crude oil output reached 3.5 million
b/d, with production capacity at 4.5 million b/d. These were the
highest levels Iraq had achieved since 1979. Following Iraq's
invasion of Kuwait and the subsequent multilateral embargo on
Iraqi oil exports, though, oil production fell to around 300,000
b/d. By 1993, Iraq had repaired most war-related damage to its
production facilities, and output has remained relatively constant
under U.N. sanctions until the recent "oil-for-food"
program.
In 1996, Iraqi net crude oil production was 580,000
b/d. However, gross oil production in 1996 was slightly more than
750,000 b/d, although 200,000 b/d of that was used for reinjection
in secondary recovery operations. About 520,000 b/d of Iraq's
net crude output is used for domestic consumption, either in refining
or in direct burning by industrial customers or utilities. Following
the implementation of U.N. Resolution 986 in January 1997, Iraqi
oil production rose during the first six months of the year to
an average of more than 1.1 million b/d. During this time, however,
monthly output rates differed by as much as 350,000 b/d, according
to preliminary data.
The United Nations has authorized the Iraqi export
of roughly 60,000 b/d of crude oil and 25,000 b/d of refined products
to Jordan. In January 1997, Iraq renewed its post-Gulf War supply
agreement with Jordan, under which Iraq will provide up to 25
million barrels of crude and 7 million barrels of refined products
(diesel, fuel oil, and liquefied petroleum gas (LPG)) in exchange
for Jordanian goods and services in 1997. It is estimated that
Jordan spends $70 million a year to import Iraqi oil with the
use of 2,000 trucks. As of 1996, Iraq has accrued a debt to Jordan
of over $1.2 billion since the Gulf War. Through the use of a
special account at the Jordan Central Bank, Iraq is credited for
the value of its oil shipments and debited for its purchases of
goods and services. In addition to U.N.-sanctioned oil exports
to Jordan, there have been various reports that Iraq is smuggling
up to 100,000 b/d of crude oil and products to Turkey via truck,
to Iran across the Fao Peninsula with barges, and to Dubai with
the use of small tankers sailing from Umm Qasr. Various press
reports also have estimated that these illegal shipments may provide
Iraq with up to $700 million a year in revenues.
OPEC
Iraq was one of OPEC's
founding members in 1960. At the beginning of 1990, Iraq had a
production quota of 3.14 million b/d, or roughly 14 percent of
OPEC's
total output. Between February 1994 and November 1996, Iraq's
OPEC quota was fixed at 400,000 b/d. In November 1996, its quota
was raised to 1.2 million b/d in order to accommodate the limited
increased oil exports authorized by U.N. Resolution 986.
Iraq's
Oil Industry
Iraq nationalized its oil industry in 1973 and subsequently
placed all operations under the control of the Iraq National Oil
Company (INOC). A number of semi-autonomous companies under INOC
handle specific functions such as exploration, engineering, transportation,
refining, and international marketing. The Iraqi nationalization
resulted in the seizure of assets from the Iraqi Petroleum Company
(IPC), which comprised British Petroleum, Total, Shell, Exxon,
Mobil, and Partex. Prior to the Iran-Iraq War, IPC as well as
companies operating under service contracts (Brazilian state-owned
Braspetro and Elf Aquitaine) made significant discoveries in Iraq,
such as Kirkuk (1927), Rumaila (1953), Buzurgan (1969), Abu Ghirab
(1971), Majnoon (1976), and Nahr Umar (1977).
Oil Field Development, War, and Current Status
The Iran-Iraq War's
greatest impact on the Iraqi oil industry was not so much damage
to oil production facilities as an elimination of Iraq's
ability to export its crude oil. During the war, Iranian gunboats
and bombing eliminated the use of Iraq's
Persian Gulf terminals. In 1983, Syria closed its 800,000 b/d
Banias pipeline, which was a vital Iraqi access route to the Mediterranean
Sea and European oil markets. In the Gulf War, Iraq's
southern oil industry was decimated, with that region's
capacity falling from 2.25 million b/d (which had just been reinstalled
fully after the war with Iran) to 75,000 b/d in mid-1991. Iraq's
largest producing oil field is Rumaila, whose North and South
zones have a production capability of 700,000 b/d. The Gulf War
resulted in the destruction of the production infrastructure at
North and South Rumaila (gathering centers, compression/degassing
stations), the PS1, Tuba, Zb1, and Zb2 storage facilities, the
1.6-million b/d Mina al-Bakr export terminal, and pumping stations
along the 1.4-million b/d Iraqi Strategic Pipeline. By early 1993,
however, infrastructure repairs to Southern Oil Company's
(SOC) facilities in southern Iraq had been completed. Prior to
the start of U.N. Resolution 986, SOC's
gross crude oil output (prior to re-injection efforts) was around
520,000 b/d. Most of this was produced from North and South Rumaila.
In addition, SOC has seven other sizable fields which previously
were online, but which now remain damaged or partially-mothballed
until U.N. sanctions are lifted. These fields include Zubair,
Luhais, Suba, Buzurgan, Abu Ghirab, Fauqi.
The Kirkuk field was brought online by IPC in 1934
and still forms the basis for northern Iraqi oil production today.
Kirkuk has over 10 billion barrels of remaining proven oil reserves.
The Jambur, Bai Hassan, and Khabbaz fields are the only other
currently producing oil fields in northern Iraq. While Iraq's
northern oil industry remained relatively unscathed during the
Iran-Iraq War, an estimated 60 percent of Northern Oil Company's
(NOC) facilities in northern and central Iraq were damaged in
the Gulf War. Also, post-1991 fighting between Kurdish and Iraqi
forces in northern Iraq resulted in temporary sabotages of the
Kirkuk field's
facilities. In 1996, production capacity in northern and central
Iraq was estimated at between 700,000-1 million b/d, down from
around 1.2 million b/d before the Gulf War. Most war-related damage
was repaired by 1993. Since that time, NOC has used field rotations
to keep production facilities in working order until the lifting
of U.N. sanctions.
Since the Iran-Iraq War, limited field development
has occurred. With Total's
technical assistance, the 11-billion barrel East Baghdad came
online April 1989 following the Iran-Iraq War. This centrally-located
field currently produces 50,000 b/d of heavy, 23o API
oil as well as 30 million cubic feet per day (Mmcf/d) of associated
natural gas. Iraq hopes to add additional facilities to boost
output to over 150,000 b/d. In late 1989, the smaller West Tikrit
field came online. In early 1990, the Zubair field's
largest reservoir was tapped, boosting output from 70,000 b/d
to 230,000 b/d. In February 1990, the Suba field was brought onstream,
with 20,000 b/d of oil and 14 Mmcf/d of associated gas. In April
1994, the long-postponed Saddam field development was completed,
although there are conflicting reports as to whether the field
is currently online. Saddam contains 3 billion barrels of oil
and 5 Tcf of associated gas. Iraq is seeking foreign assistance
for a second phase Saddam development, which would raise capacity
from a 25,000 b/d at present to 50,000 b/d of oil and 300 Mmcf/d
of gas. Also in 1994, the Khabbaz field came online with an output
of 30,000-40,000 b/d of crude oil and 45 Mmcf/d of associated
gas. Further development work is planned for this 2 billion barrel
field.
The Post-U.N. Sanctions Development Plan
In the past, Iraqi officials have claimed that the
country could reach a production capacity of 2 million b/d within
3 months and 3 million b/d within 2 years after the lifting of
U.N. sanctions. In May 1997, Faleh al-Khayat, Director General
for Planning at the Iraqi Oil Ministry, was quoted in trade press
as stating that 3 million b/d of production capacity could be
reached within 1 year, 3.5 million b/d within 3-5 years, and 6
million b/d in less than a decade after the lifting of U.N. sanctions.
This would be accomplished by a three-phased development effort
that includes: 1) re-working and upgrading existing upstream and
downstream facilities; 2) attracting foreign investment for new
field development and production; and 3) actively conducting exploration
and development activities in prospective areas such as the Western
Desert.
Field development work under the three phases will
be extensive, with 33 fields containing 50 billion barrels of
reserves and a potential production capability of 4.65 million
b/d slated for eventual development. Of these 33 fields, twenty-five
have been appraised, but never developed. Of the 25 appraised
fields, eleven are located in southern Iraq and have an output
potential of 3 million b/d. Smaller, undeveloped fields are located
in northern and central Iraq and have estimated output capabilities
of 450,000 b/d and 300,000 b/d, respectively. A further eight
of the 33 fields are already in production, but will have more
work done to tap additional reservoirs and to bring another 900,000
b/d of production online.
The Oil Ministry estimates that development costs
in Iraq are as low as $1/barrel of incremental production in some
areas. However, there is no doubt that any post-sanction oil program
will require massive amounts of foreign investment and a high
degree of political and economic stability. In May 1997, former
Iraqi Oil Minister Fadhil al-Chalabi estimated that Iraq would
need at least $5 billion of foreign investment during the first
2-3 post-sanction years in order to bring the country's
oil output back to pre-Gulf War levels. He also projected that
$30-50 billion of foreign investment would be required to bring
capacity up to 5.5 million b/d. Iraq's
financial burden during this time frame would be around $2 billion,
which would include $950 million for field development, $700 million
to revitalize the downstream transportation and export system,
and $100 million to conduct well workovers. In addition, Iraq
plans to allocate eight groups of fields for operation by domestic
firms. These fields, with an estimated capacity of 1 million b/d,
will require $4 billion in investment during the three development
phases.
In March 1995, Iraq held an international oil conference
which first outlined the country's
planned post-sanction development plans. Since that time, foreign
oil companies have shown a rising interest in post-sanction oil
projects. As of June 1997, there reportedly were almost 60 foreign
oil companies from a wide variety of countries that were in discussions
with the Iraqi government (see table).
Iraq plans to offer new fields to foreign oil companies
through production sharing contracts (PSC), joint ventures, and
service contracts. Initially, Iraq plans to offer up to 25 new
fields to foreign companies. Ten of these fields, with a production
potential of 2.7 million b/d, are slated for development under
PSCs with foreign companies. Four of these fields are located
in southern Iraq and, with a combined production potential of
2.1 million b/d, represent the cornerstone of Iraq's
post-sanction development plans. These four "giant"
southern fields are Majnoon, West Qurna, Nahr Umar, and Halfaya.
As of June 1997, Iraq had signed two production sharing
contracts (PSCs) for two post-sanction field developments. After
an initial agreement made in August 1996, Iraq signed a PSC with
China National Petroleum Corporation (CNPC) and Chinese state-owned
Norinco for development of the al-Ahdab field. Al-Ahdab is located
about 40 miles south of al-Kut in central Iraq. The field contains
an estimated 1.4 billion barrels of oil and has a production potential
of roughly 90,000 b/d. CNPC and Norinco reportedly have formed
a new company, named al-Waha, to undertake the field development.
Development and operating costs are expected to be around $1.3
billion.
In March 1997, Iraq signed another PSC with a consortium
of Russian firms for the second-phase development of the 15 billion
barrel West Qurna field, which is located west of Basra near the
Rumaila field. The Russian consortium comprises Lukoil (52.5%),
Zarubazhneft (11.25%), Machinoimport (11.25%), and an Iraqi company
that will be selected by the government (25%). The West Qurna
PSC will include development of the Yamamah and deeper Mishrif
reservoirs, which combined, contain close to 8 billion barrels
of light (37o API) and heavy (27o API )
crude oil. The field has a production potential of 500,000-750,000
b/d, two-thirds of which will be heavier Mishrif crude. The West
Qurna PSC will pick up where a Soviet firm, Technoexport, left
off with its first phase development. In 1987, Technoexport signed
a $600-million service contract for a 200,000-b/d first phase
development of West Qurna, which Italy's
TPL later farmed into as a subcontractor. Initial production was
due to come onstream in 1992, but Technoexport halted work in
December 1990 until the Gulf crisis was resolved. Lukoil reportedly
had been in discussions concerning the West Qurna project since
early 1994. At present, most of the required production wells
have been drilled, although a crude pipeline spur and associated
gas processing stations are only partially completed. Completion
of first phase development could take up to a year, but it is
unclear exactly how much surface work remains and whether this
is included in the recent PSC, which is valued at $3.7 billion.
Under current U.N. sanctions, foreign oil companies
with PSCs can, in theory, perform some types of work in Iraq.
Under the al-Ahdab contract, the Middle East Economic Survey
reported in June 1997 that al-Waha is planning to re-interpret
seismic surveys, authorize local Iraqi companies to perform site
preparation activities, and construct required equipment outside
of Iraq. Under the West Qurna PSC, it has been reported that Iraq
will perform site preparation activities with local contractors,
while equipment manufacturing will occur in Russia. Under both
the al-Ahdab and West Qurna PSCs, foreign firms will pay all field
appraisal and development costs. Costs will be recovered through
a share of subsequent oil production from the fields.
Besides West Qurna, PSCs for the three other large
southern oil fields are in various stages of negotiation. The
largest of the four fields is Majnoon, which has proven and probable
reserves of at least 20 billion barrels of 28o-35o
API oil. Located only 30 miles north of Basrah on the Iranian
border, Majnoon originally was discovered and partially-appraised
by Braspetro in the late 1970s. Prior to the outbreak of the Iran-Iraq
War, twenty-four wells had been drilled to assess the field's
14 oil-bearing zones. Since that time, Iraq has conducted limited
reservoir and design studies. At present, France-based Elf Aquitaine
is in exclusive talks with Iraq concerning development rights
for this field. In the past, it was reported that Elf would plan
to retain operatorship and a 40 percent stake in the $3-4 billion
project. Initial output is projected at 300,000 b/d, with later
development yielding 600,000 b/d or more. Ultimate production
potential is estimated at up to 2 million b/d.
As with Majnoon, the 6-billion barrel Nahr Umar field
was explored and appraised by Braspetro in the mid- to late 1970s.
Prior to the Iran-Iraq War, five wells had been drilled. At present,
France-based Total is in exclusive discussions with Iraq over
development of Nahr Umar. Initial output from Nahr Umar is expected
to be around 400,000 b/d of 42o API crude, but may
reach 500,000 b/d with more extensive development.
The 5-billion barrel Halfaya project is the final
large field development in southern Iraq. Italian Agip originally
drilled four appraisal wells at Halfaya under a service contract
in the 1970s. A variety of companies reportedly have shown interest
in the field, which could ultimately yield 200,000-300,000 b/d
in output.
Smaller developments of fields with under 2 billion
barrels in reserves also are receiving interest from foreign oil
companies. These fields, along with anticipated production levels,
include: Nasiriya (250,000 b/d); Khormala (100,000 b/d); Hamrin
(80,000 b/d); and Gharraf (100,000 b/d). As of June 1997, Italy's
Agip was thought to be close to signing a contract for the Nasiriya
development. In the past, Agip officials have stated that they
would like to use the field's
access to infrastructure as a "reference
point"
for development of a number of satellite fields.
In addition to the 25 new field projects, Iraq plans
to offer foreign oil companies service contracts to apply technology
to eight already producing fields. This will include new reservoir
development at the North and South Rumaila, Zubair, Luhais, Subba,
Abu Ghirab, Buzurgan, and Fuqa fields. Iraq also will provide
incentives to promote exploration in the remote Western Desert.
Located near the Saudi and Jordanian borders, Iraq has identified
at least 110 prospects from previous seismic work in this region.
Oil Export Pipelines/Terminals
In theory, Iraq has almost 7 million b/d of crude
export capacity spread between tanker terminals in the Persian
Gulf and overland pipelines through Saudi Arabia, Syria, and Turkey.
However, Iraqi crude oil exports reached a peak of 3.25 million
b/d in 1979, and the remaining capacity was never used when it
was available. Much of Iraq's
export capability was lost during the Iran-Iraq War, either to
war-related damage or due to political reasons. By 1983, Iraq's
export capabilities were only 700,000 b/d, or less than 30 percent
of operable field production capacity at that time. The respite
prior to the Gulf War allowed Iraq to boost crude exports to over
2.2 million b/d, which traveled mainly via the Kirkuk-Ceyhan pipeline,
the Mina al-Bakr terminal, and Saudi Arabia's
IPSA pipeline.
According to a variety of estimates, Iraq's
current crude export capacity is somewhere between 2.0-3.5 million
b/d. Within five years after the lifting of sanctions, Iraqi officials
have stated their intention of raising the countries export capacity
to 6.4 million b/d. Under U.N. Resolution 986, an estimated 385,000
b/d flowed though the Kirkuk-Ceyhan pipeline. Another 290,000
b/d was exported from Mina al-Bakr. In 1996, Iraqi officials hoped
that U.N. Resolution 986 eventually would be expanded to include
refined product exports. If this ever occurred, product exports
likely would be loaded at Mina al-Bakr or at another Gulf terminal.
Pipelines
The Kirkuk-Ceyhan pipeline is Iraq's
largest operable crude export pipeline. This Iraq-Turkey link
consists of two parallel lines built in 1977 and 1987. A 40-inch
line has a capacity of 1.1 million b/d. A second, parallel 46-inch
line has a capacity of 500,000 b/d and was designed to carry Basrah
Regular exports. The 40-inch line has additional pumping stations
and fewer bottlenecks, which allow for greater throughput than
that of the larger line. In the Gulf War, both pipelines were
disabled when the crucial IT-2 pumping station was destroyed.
The IT-1 pumping station near Kirkuk received lighter damage and
is presently functional. The subsequent imposition of U.N. sanctions
on Iraqi crude exports resulted in a complete closure of the Kirkuk-Ceyhan
pipeline between 1991 and 1997.
Prior to flushing operations in mid-1996, there were
2.9 million barrels of 36o API crude trapped in the
40-inch line and 3.8 million barrels of 34o API crude
inside the 46-inch line. While this stagnant crude turned to sludge
in some sections of the pipelines, Turkey was able to flush the
smaller 40-inch line. It has been used for Iraqi crude exports
under U.N. Resolution 986. As of late 1996, certain sections of
the larger pipeline were still in need of repair. Also, repairs
to the IT-2 pumping station do not allow for previous throughput
levels, especially on the 46-inch line. Therefore, total current
capacity on the 600-mile Kirkuk-Ceyhan pipeline is in the range
of 700,000 b/d - 1 million b/d.
Iraq's
two other overland export pipeline options are closed for political
reasons. In April 1982, Syria closed the 500-mile, 800,000 b/d
Banias pipeline in order to show its support for Iran during the
Iran-Iraq War. This action cut an important export route for Kirkuk
crude, which had been carried by the pipeline to Mediterranean
terminals at Banias in Syria and Tripoli in Lebanon. When operational,
between 450,000-600,000 b/d of Iraqi crude was exported to European
markets through the line, with the rest feeding Syria's
Banias and Homs refineries and Lebanon's
smaller Tripoli refinery. Since the closure, Syria has used the
line to transport 360,000-b/d of its own crude output. In addition,
a 60-mile stretch of the line has been converted by Syria to carry
natural gas.
In June 1997, a thawing of relations between Iraq
and Syria led to the reopening of three border crossings. This
ended a 17-year chill in bilateral relations after Syria backed
Iran in the 1980-88 Iran-Iraq War. The border re-openings have
fueled speculation arose as to whether improved political relations
would lead to a re-opening of the Banias line for Iraqi crude
exports. A re-opening of the line would provide Syria with transit
revenues, but it also would displace Syrian crude and require
reconversion of the pipeline section that now carries natural
gas.
Following the 1982 closure of the Banias pipeline,
Saudi Arabia agreed to allow Iraq to export 500,000 b/d of crude
through the Petroline to the Red Sea. The first phase of the Iraqi
pipeline to Saudi Arabia (IPSA-1) involved construction of a line
from Rumaila to the Petroline's
PS3 pumping station. After completion of IPSA-1 in 1985, the second
phase IPSA-2 project was begun. It included construction of a
1.65-million-b/d capacity line running parallel to the Petroline,
an additional pumping station to boost IPSA-1's capacity to 1.65
million b/d, storage facilities, and a new Red Sea terminal. Iraqi
crude began flowing through the IPSA lines in January 1990. Following
Iraq's
invasion of Kuwait in August 1990, Saudi Arabia closed the IPSA
link permanently.
In order to optimize export capabilities, Iraq constructed
a reversible, 1.4-million b/d "Strategic
Pipeline"
in 1975. This pipeline consists of two parallel 700,000 b/d lines
running in opposite directions. It allows for the export of Kirkuk
crude from the Persian Gulf and for Rumaila crudes to be shipped
through Turkey. During the Gulf War, the Strategic Pipeline was
disabled after the K-3 pumping station at Haditha as well as four
additional southern pumping stations were destroyed. Repairs were
finished in 1992. Under its post-sanction development plans, Iraq
wishes to add several new solar-powered pumping stations to boost
the pipeline's
overall capacity. Iraq also plans to expand the country's
crude storage capabilities from 14 million barrels to 21-24 million
barrels. Most of this work will center on the Fao tank farm.
In September 1995, Jordan and Iraq signed a tentative
agreement to build a $500-million, 100,000-b/d pipeline running
from Iraq's
Haditha pumping stations to Jordan's 100,000-b/d Zarqa refinery.
Though the proposal appeared dead in 1996, Iraq and Jordan agreed
in principle in January 1997 to an expanded $1.4-billion, 365-mile
pipeline that would have a capacity of 250,000 b/d and would supply
a new planned refinery project in Jordan.
Terminals
In the Persian Gulf, Iraq has three tanker terminals
at Mina al-Bakr, Khor al-Amaya, and Khor al-Zubair. Iraq also
has additional dry goods ports at Basrah and Umm Qasr, which is
being outfitted to accommodate crude tankers. Mina al-Bakr is
Iraq's
largest oil terminal, with four 400,000-b/d capacity berths capable
of handling very large crude carriers (VLCCs). Iraq claims that
Gulf War damage to Mina al-Bakr has been repaired in large part
and that the terminal now has a capacity of 1.2 million b/d. In
mid-1996, however, there were conflicting reports that export
capacity at Mina al-Bakr is limited to 500,000 b/d, due partly
because of a lack of crude stream separation facilities and unrepaired
storage tanks.
Until recently, navigation into Mina al-Bakr was
impaired by mines and by Iraqi Oil Tankers Company's
155,000-Dwt Ameriyah tanker, which was sunk during the Gulf War
while leaving the terminal with an estimated 730,000 barrels of
crude oil. Between 1994 and late 1996, Mina al-Bakr serviced smaller
30,000-Dwt tankers, including a well-publicized trial loading
by the 36,900-Dwt Kirkuk tanker in August 1996. While three channels
allowing for unrestricted passage and safe navigation reportedly
have been cleared, however, it is unknown whether Mina al-Bakr's
underwater protection system can safely accommodate large volumes
of VLCC traffic.
Iraq's
Khor al-Amaya terminal was virtually destroyed in the Iran-Iraq
War. Repairs were begun in 1993, and Iraq stated in 1995 that
the terminal could load 600,000 b/d. Upon full completion of repairs,
Iraq projects Khor al-Amaya's
capacity will rise to 1.2 million b/d. Iraq's
third terminal, Khor al-Zubair, is linked to the Umm Qasr port
by a 30-mile long canal. While Khor al-Zubair generally handles
dry goods, it has the capability to service small quantities of
liquefied petroleum gas (LPG) and refined products. Like Umm Qasr,
Khor al-Zubair is being outfitted with crude loading capabilities.
Refining
Iraq's
current refining capacity is around 600,000 b/d, down from its
pre-Gulf War, nameplate capacity of 700,000 b/d. Iraq has 10 refineries
and topping units. The largest are the 150,000-b/d Baiji North,
140,000- b/d Baiji Salaheddin, 126,000-b/d Basrah, and 100,000-b/d
Daura plants. During the Gulf War, both of the Baiji plants in
northern Iraq as well as the refineries at Basrah, Daura, and
Nasiriyah were severely damaged. This cut Iraq's
refining capacity to around 60,000 b/d in March 1991. While the
bulk of Iraq's
refinery capacity appears to have been restored by 1993, several
of the smaller refineries, namely the 27,000-b/d Kirkuk and the
27,000-b/d Nasiriyah plants, were cannibalized for parts to repair
damage at Baiji, Basrah, and Daura, which was expanded in 1994.
In addition, even though total capacity now approaches pre-1991
levels, refining depth has been severely reduced, and due to rising
demand, Iraq has been forced to utilize some of its stocks. A
lack of light-end products, low quality gasoline, and rising pollution
levels because of a lack of water treatment facilities are some
problems now faced by Iraq's
downstream sector. Post-sanction plans include attracting foreign
investment to perform refinery upgrades and building a new $1-billion,
290,000-b/d "Central"
refinery near Babylon.
NATURAL GAS
After an upward revision in December 1995, Iraq now
has 118 Tcf of proven natural gas reserves, along with roughly
150 Tcf probable reserves. About 70 percent of Iraq's
gas reserves are associated gas, that is, gas that is produced
in conjunction with oil production. Until 1990, all of Iraq's
natural gas production was from associated fields. In 1995, Iraq
produced slightly more than 300 million cubic feet per day (Mmcf/d),
down drastically from peak output levels of 1.9 billion cubic
feet per day (Bcf/d) in 1979. Within five years after the lifting
of U.N. sanctions, Iraq hopes to produce 775 Mmcf/d for export.
Iraq's
primary sources of associated gas are the Kirkuk, Ain Zalah, Butma,
and Bai Hassan oil fields in northern Iraq as well as the North
and South Rumaila and Zubair fields in the south. About 70 percent
of Iraq's
associated gas production capacity is located in southern part
of the country. Gas flaring was reduced from roughly 50 percent
in 1989 to under 5 percent in 1994. This was accomplished mainly
through increased use of Iraq's
two gas gathering systems, which were built in the 1980s. The
Northern Area Gas Project started operation in 1983. It is able
to recover and process up to 550 Mmcf/d of sour gas, with a resulting
maximum output capacity of 300 Mmcf/d of dry gas as well as a
mix of propane, butane, natural gasoline, and pure sulfur. The
Southern Area Gas Project was completed in 1985, but was not brought
online until February 1990. It has nine gathering stations and
a larger processing capacity of 1.5 billion cubic feet per day.
Gas gathered from the North and South Rumaila and Zubair fields
is carried via a pipeline to a 575-Mmcf/d natural gas liquids
(NGL) fractionation plant in Zubair and a 100-Mmcf/d processing
plant in Basrah. At Khor al-Zubair, a 17.5 million cubic foot
LPG storage tank farm and loading terminals were added to the
southern gas system in 1990. LPG export capacity was 4 million
tons per year in 1990. In addition, Iraq built another system
in 1985 to recover up to 200 Mmcf/d of gas from the Jambur field.
Iraq's
only non-associated gas production is from the al-Anfal field
in northern Iraq. It was brought online in 1990 with an output
of 200 Mmcf/d. Al-Anfal production is piped to the Jambur gas
processing station near the Kirkuk field, which is 20 miles away.
Al-Anfal's
gas resources are estimated at 4.5 Tcf, of which 1.8 Tcf is proven.
In March 1996, Iraq and Turkey signed an initial
memorandum of understanding regarding a gas supply deal between
the two countries. Their commitment towards this deal was reaffirmed
publicly in December 1996 and May 1997. The $2.7 billion project
will involve building of an 855-mile, 1-Bcf/d capacity gas export
pipeline linking northern Iraq to Turkey's
Anatolia region. The proposed pipeline will have two compressor
stations. Gas will be supplied from five non-associated gas fields
in northern Iraq with a combined reserves of 9.5 Tcf. These fields
comprise al-Anfal (1.8 Tcf), Chemchemal (2.1 Tcf), Jaria Pika
(0.9 Tcf), Kashm al-Ahmar (1.4 Tcf), and Mansuriyah (3.2 Tcf).
Plans call for development work at al-Anfal and Mansuriyah to
tapped first, followed by other fields where more limited exploration
work has occurred. During the first three years following start-up,
targeted gas export levels will be 200 Mmcf/d, 345 Mmcf/d, and
1 Bcf/d, respectively.
Of the project's
anticipated $2.7 billion cost, $1.8 billion will be for field
development and pipeline construction work inside Iraq. It is
doubtful that Iraq
would be able to obtain the required capital or expertise
to complete the project without foreign assistance. Consequently,
Iraq is seeking foreign participation in the project and interest
reportedly has been shown by Gas de France, BHP, and TransCanada
Pipelines, and other companies. At present, it is unclear how
existing U.N. sanctions will affect foreign participation in this
project. The $1-billion Turkish side of the project will involve
Botas, TPAO, and Tekfen, which will be responsible for pipeline
construction in Turkey.
Production
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CNPC (China) & Norinco (China), and Petrofina (Belgium), Preussag (Germany) for technical work. (PSC signed 6/97) |
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Chauvco Resources (Canada) | ||
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CPC (Taiwan), Kriti (Greece), TPAO (Turkey), Branch Energy (UK), and Japex (Japan) | |
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BHP (Australia), Ssangyong-led consortium (S.Korea), CNPC, and a Hungarian company | |
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IPC (Canada), and a Czech company | ||
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Saved for domestic Iraqi firms, but Petrom (Romania) in talks for drilling/engineering contract | |
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Machinoexport (Russia), CNPC, and Lamaj (Netherlands) | ||
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Elf (France)(exclusive), along w/other firms for farm-in agreements |
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TPAO, Botas, Tekfen under MOU signed 3/96, along with Gaz de France, BHP, TransCanada Pipelines, and two separate consortiums comprising Russian and Turkish firms |
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Total (France)(exclusive) | |
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Agip (Italy)(possibly exclusive), Respol (Spain) | |
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development of new reservoir to boost prd to 500,000 | Lukoil, Machinoimport, Zarubezhneft, Tatarneft (all Russia firms), and others | |
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Sinochem (China), Norinco, Kondpetroleum (Russia), Pacific Resources (UK), and Perenco (France/UK) | ||
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Royal Dutch/Shell, Petronas (Malaysia), Escondido (Canada), CanOxy, and Crescent Petroleum (UAE) | |
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Machinoimport, CNPC, and Lamaj | |||
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Pertamina (Indonesia), ONGC (India), and Sonatrach (Algeria) | |
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Lukoil (52.5%), Zarubazhneft (11.25%), Machinoimport (11.25%), and a gov't chosen Iraqi firm (25%) (PSC signed 3/97) |
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Agip, Deminex, Statoil, Petronas, Petrofina, Preussag, TPAO, Repsol, Petrom, Crescent, Escandido, CanOxy, CNPC, Ranger Oil, BHP, Sonatrach, Royal Dutch/Shell, various consortiums of Indian and Korean firms, and a Hungarian firm | |||
| Sources: MEES, PIW, OGJ, Oil Daily, Arab Oil & Gas Directory | ||||
Links to other sites:
1996 CIA World Factbook - Iraq
U.S. Treasury's Office of Foreign Assets Control
The following links are provided solely as a service to our customers, and therefore should not be construed as advocating or reflecting any position of the Energy Information Administration (EIA) or the United States Government. In addition, EIA does not guarantee the content or accuracy of any information presented in linked sites.