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Oil companies seek independent water facilities in Iraq to boost output

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As delays to Iraq's critical water supply facility project continue, international oil companies operating in the south are seeking to pushing ahead with their own water injection facilities to meet production targets.

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Malaysia's Petronas, operator of the Gharraf oil field, is the latest developer to join the list, asking the oil ministry for permission to build a standalone facility, sources close to the project said Sunday, November 2.

The new projects are driven by delays to Iraq's multi-billion dollar Common Seawater Supply Facility project, a joint scheme that will be critical to longer-term plans for the management of reservoir pressure at a number of southern fields.

It is, however, still stuck in the conceptual design phase, having suffered several setbacks since it was first conceived in 2010.


The $5 billion first phase of the CSSF, which will provide 4 million b/d of treated water, is not expected before the end of 2018 at the earliest, assuming the two contracts for design work are signed immediately.

Project management consultants CH2M Hill had been hoping to award the front-end engineering and design in the second quarter of 2013 and startup the project in the third quarter of 2017.

According to industry sources, CH2M Hill is still waiting for details from the oil ministry, and its subsidiaries South Oil Company and State Company for Oil Projects, specifying the amounts of water required for each field and the time schedules.

This has been held up by delays to final agreements with the oil companies on their revised plateau targets. For the largest fields -- West Qurna-1 and Rumaila -- new deals were only reached in September, while negotiations are still going on with Shell for the Majnoon oil field.

Complicating matters further is the fact that only two firms are in the running for each of the main FEED contracts -- the US' Parsons for the water treatment plant and Austria's ILF Consulting Engineers for the pipeline contract.

The lack of competition contravenes the oil ministry's best practices and could cause further delays for SOC if it proceeds with the contract awards. It could even spark talk of a reissue of the tender.

CSSF delays are an increasing concern for the operators of the southern oil fields and threaten to derail the timing of Iraq's entire southern upstream expansion program.

Water is needed to sustain reservoir pressures of the main producing Mishrif formations at the old fields of Rumaila, West Qurna-1 and Zubair.

These fields are currently fed by water from the old system from the Garmat Ali intake station at the Shat Al-Arab waterway, which was revamped by BP.

It currently supplies around 500,000 b/d of treated water and is expected to reach 750,000 b/d by the end of 2014. But for production to be boosted further, more water is required. Otherwise production from these fields will stagnate by the end of 2015.

The newer West Qurna-2, Majnoon and Gharraf fields will not need water for injection for the next three years, until they reach their contractual plateaus.

The uncertainties and delays surrounding the CSSF project have led US oil major ExxonMobil and Russia's Lukoil to submit requests for permission to build a water injection scheme on the banks of Iraq's Third River, a system which collects drainage water along the central and southern spine of Iraq, terminating at the Shat al-Basrah.

The idea is to build a temporary plant to feed each of these fields with up to 100,000 b/d of extremely high quality water for injection. The two majors want to fast track the project.

Petronas has submitted a request to build a plant to be fed by the sweet waters of the Gharraf river.

The Oil Ministry, however, appears reluctant to sanction the independent schemes, according to sources. All the projects will be subject to immediate cost recovery by the international oil companies, through the allocation of payback oil.

This is in addition to the cost of the common supply facility, with a total cost of more than $10 billion.

--Faleh al-Khayyat, newsdesk@platts.com
--Adal Mirza, adal.mirza@platts.com
--Edited by E Shailaja Nair, shailaja.nair@platts.com