Bob TippeeManaging Editor-
Economics and Exploration
Iraq raises questions for the world oil market beyond those frequently asked about when and under what circumstances it will resume exports.
Two wars since 1981 have obscured encouraging results from a 20 year exploration program that were only beginning to come to light when Iraq invaded Kuwait in August 1990. Those results indicate the country might someday be able to produce much more than the 3.2 million b/d it was flowing before a United Nations embargo blocked exports.
Between the end of the war with Iran in 1988 and the Kuwaiti invasion, Iraqi government officials were touting their country's oil and gas potential and moving to boost productive capacity. They had let development contracts to international oil companies and were discussing others.
Even now, with their economy in virtual isolation, Iraqi officials hint at a role for international exploration and development capital once their country escapes the U.N. sanctions.
So while current attention focuses on how the market will handle renewed Iraqi exports, longer term effects of a reemergent Iraq could be much greater.
If exploratory potential is anywhere near what officials asserted in the late 1980s, and if Iraq eventually turns hospitable to international capital, the country could become a world class opportunity for oil companies as well as an exporter with productive capacity approaching that of Saudi Arabia.
None of this will occur while U.N. sanctions remain in place. And most observers doubt the sanctions will disappear as long as Iraqi President Saddam Hussein holds power in Baghdad.
But political conditions can change quickly. Under a new, secular regime, Iraq might welcome non-Iraqi oil companies and capital as essential to economic recovery. It's a prospect that warrants a new industry look at what the country has revealed about its geology and exploration history.
THE RESERVES HIKE
Iraq officially trumpeted its petroleum potential by more than doubling its oil reserves estimate to 100 billion bbl in 1987.
Most oil industry observers discounted the estimate as political exaggeration. Members of the Organization of Petroleum Exporting Countries at the time were competing among themselves for production quotas, some basing their arguments on reserves volumes.
Iran, Venezuela, and the United Arab Emirates also announced sharply higher reserves in 1987. But Iraq had an especially strong incentive to exaggerate for the sake of production quotas: revenue needs created by the war it had waged against Iran since 1981.
Iraqi officials nevertheless went to unusual lengths to substantiate their reserves claim. They insisted the reserves hike resulted from a 20 year exploration campaign and provided a sprinkling of details on results.
EXPLORATION RESULTS
At the 28th International Geological Congress held in Washington, D.C., during July 1989, Iraqi officials compared results of two periods of exploration.
They said in the 40 years following discovery of supergiant Kirkuk oil field in 1927, 62 structures had been drilled in an effort that yielded 35 discoveries. Reserves discovered during the period totaled 34 billion bbl.
During 1968-87, the officials said, Iraqi exploration tested 52 structures, found 38 oil fields, and made 30 new pool discoveries in productive fields. The more recent exploration effort followed a 180,000 line km seismic program covering most of the country.
It was on the basis of the 1968-87 discoveries that Iraq hiked its reserves estimate to 100 billion bbl of oil in a total of 73 fields, including six supergiants and 22-23 giants.
About 76% of Iraq's oil reserves lie in Cretaceous reservoirs, more than 23% in Tertiary, and the small remainder in Jurassic and Triassic.
Iraqi officials said surface and seismic surveys conducted through 1987 identified more than 500 closed structures in the country, which lies on the eastern flank of the Arabian-African platform. The structures resulted from tectonism responsible for the Zagros Mountains to the east, as well as basement block faulting.
Drilling conducted through 1987 tested 16 of 104 structures identified on the northeast flank of the Arabian platform, 44 of 153 on the northeast flank of the Mesopotamian foredeep, nine of 156 on the southwest flank of the Mesopotamian foredeep, and 61 of 144 in the central fault zone.
Iraqi officials said the 35 fields discovered during 1927-67 had original oil in place of 164 billion bbl. The 34 billion bbl reserves estimate for that period implies a recovery rate of 21%.
The 1968-87 exploration program found 270 billion bbl of original oil in place, officials said. The 66 billion bbl of reserves figure attributed to the effort implies a 24% recovery rate.
For both periods combined, the recovery factor amounts to 23%. A recovery increase thus could give a big boost to Iraq's reserves.
Iraqi officials attributed 60.5 billion bbl of reserves to supergiant fields: Kirkuk, Rumaila (discovered in 1953), East Baghdad (1975), Majnoon (1976), West Qurnah, and South Rumaila. They said giant fields contain 32 billion bbl of reserves.
They estimated Iraq's probable and possible reserves at 40 billion bbl each. The possible reserves figure excludes potential in Paleozoic rocks, which probably are gas prone. Only five Paleozoic wells had been drilled as of late 1988, none in the southern part of the country where reservoirs of that age are considered most promising.
Not included in the proved reserves total was what the officials described as a major Jurassic discovery in Rumaila field, apparently made just before their presentation.
THE POTENTIAL
Iraqi officials said drilling in two thirds of all the country's fields had not reached below Cretaceous rocks. Furthermore, there had been no exploration of stratigraphic traps.
Little drilling is likely to have occurred in Iraq since the officials made their report.
Work immediately after Iraq's 1988 cease-fire with Iran focused on repairs to exporting facilities. The country also began negotiating with foreign companies to resume field development halted by the war.
Before the Iran-Iraq war, Iraq's productive capacity had reached 4 million b/d, and the government planned to boost capacity to 8 million b/d by the 1990s.
At the time, Braspetro, international affiliate of Brazil's state owned Petroleos Brasileiro SA, was assisting with development of Nahr Umr and Majnoon fields.
Iraq also had various types of agreements or was negotiating with companies from Italy, France, the U.S., U.K., and the former U.S.S.R.
Following the war but before the Kuwaiti invasion, Iraq was trying just to restore productive capacity to 4 million b/d. It was believed to be seeking international partners for development at least of Majnoon, after Braspetro pulled out during the war, and South Rumaila fields.
No drilling is thought to be under way in Iraq now. According to information from Baghdad, six seismic crews recently were at work in the country. Iraq thus combines rich geologic potential with a tradition of dealing with international companies, punctuated as it is by two wars. At least until now, that record and a history of secular government have made the citizenry more accommodating to the presence of foreigners than some of the Middle East's stricter Islamic cultures.
Just as the timing of resumed Iraqi exports depends on how long Saddam Hussein remains in power, realization of Iraqi petroleum potential may depend on the type of regime that follows.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
