Wealth Management by

Iraq, Saudi Arabia move to raise production

January 3, 2012 9:50 am

By Adal Mirza, MEED Energy Reporter

US investment bank Morgan Stanley estimates that the region will account for 26% of the global capacity additions until the end of the decade, with projects worth in excess of $200bn.

Much of this spending is likely to be in Iraq as the country moves ahead with its ambitious plans to raise capacity to more than 12 million barrels a day (b/d), from less than 3 million b/d today.

International oil companies are now actively launching tenders for new facilities and rehabilitating existing infrastructure at most of the fields awarded in Iraq’s first and second hydrocarbon licensing rounds in 2009. The development of the Rumaila oil field by the UK’s BP and China National Petroleum Corporation will be the biggest draw, with a potential spend of up to $34bn by 2020.

Work could also start in 2012 on the long-delayed gas capture and utilisation project, being led by UK/Dutch oil major Shell Group. After waiting for approval from the Iraqi government since late 2008, the $17bn scheme finally got the green light at the end of November 2011. Shell will want to make up for lost time building the facilities that will capture associated natural gas in four southern oil fields.

This year will also see Iraq hold its fourth oil and gas licensing round at the end of January, with 12 exploration sites up for offer. As many as 46 companies have been prequalified to bid. Security concerns, which have slowed the pace of development in Baghdad over the past few years, remain, however. The security situation has improved immensely compared with the peak level of violence seen in 2007, but analysts say the situation has worsened since 2010. Attacks on oil and transport infrastructure have been a major problem in 2011 and remain a target for insurgents in 2012.

Saudi Arabia looks to bring new capacity online

Saudi Arabia will continue to draw attention from engineering firms, with an estimated 5-6 million man hours a year planned for the general engineering services plus (GES-plus) signatories, a sign of the scale of Saudi Aramco’s ambitions. The GES-plus firms will work with state-owned Saudi Aramco’s project management team to provide engineering and construction management services for a wide range of Aramco projects, including oil and gas, and infrastructure.

The firm plans to add some 250,000 b/d of new production capacity at the Shaybah field as well as implementing enhanced recovery techniques at the giant Ghawar oil field. Work is also due to start on the planned onshore and offshore facilities for Khafji Joint Operations in the neutral zone between Saudi Arabia and Kuwait.

In Kuwait, the focus will be on the downstream sector next year. The country is tentatively moving towards launching two enormous refining schemes worth up to $30bn. The schemes have been planned since 2005, but have faced a multitude of set-backs due to political wranglings.

Other regional refining schemes have also faced delays. Abu Dhabi’s International Petroleum Investment Company (Ipic) is now undertaking a feasibility study for an integrated refinery and petrochemicals complex in Duqm in Oman, a project it aims to develop with state-owned Oman Oil Company. Ipic awarded the project management consultancy contract to US-based Shaw Group in April. The state investment arm had previously stalled its refining plans when oil prices slumped in 2009. Its interest in downstream projects was rekindled as prices started to climb again.

This extract was taken from MEED’s Yearbook 2012, to read the full article please visit Meed.com