Iraq’s Oil Reserves Revisited And Implications (2/2)
By Tariq Shafiq
Tariq Shafiq is a Petroleum Consultant, Director of Petrolog & Associates, and Chair, Fertile Crescent Oil Fields Development Company (tshafiq4@aol.com). The following paper was presented at the Iraq Petroleum 2010 conference, organized in London on 29 November – 1 December 2010 by CWC. Part 1 was published last week.
Potential Oil Reserves Estimate In 1997 P&A Study
This is the more detailed and comprehensive study, which took 3.25 man-years by a team of seven geologists, a petroleum engineer and a mathematician. In a joint study with CGES on Iraq’s Exploration Potential and Production Capacity in 1996-97, the Petrolog & Associates (P&A) team, involving myself as coordinator and principal researcher and associates from amongst the most experienced petroleum engineers and geologists, completed a four-volume comprehensive study. It covered Iraq’s proven and potential reserves.
The proven oil reserves were estimated at 128bn barrels, held in 80 fields, of which 124bn barrels was in 43 discovered fields. The remaining 37 fields were discovered but not sufficiently delineated or produced. Each had been assigned only 100mn barrels. No doubt their reserves will appreciate when developed. Iraq’s potential reserves were estimated conservatively to be in excess of 216bn barrels. There are many large fields with as much reserves as in some of the discovered giant fields. The largest eight potential fields held some 50bn barrels, compared with 92bn barrels held in eight discovered fields.
Gravity, seismic and geological surveys enabled preliminary estimates of the volume of sedimentary rocks. Estimates of potential reserves were obtained from the total number of structures and volume of potentially petroliferous sediments multiplied by a recovery factor and a success ratio. The recovery factor was based on analogy with factors from other discovered and produced reservoirs in the basin. The success ratio was obtained from past exploration performance in the basin. The integrity of the structures was based on the results of weighing the geochemical, stratigraphical, geological and geophysical data. Throughout, conservative reserves estimate parameters had been adapted and are given below.
Table 2: P&A Study Reservoirs And Oil Parameters
Formation | Porosity | SW | Recovery | FVF |
Jerbe+ | 0.22 | 0.15 | 0.30 | 1.20 |
Shiranish | 0.01 | 0.00 | 0.90 | 1.31 |
Hartha | 0.24 | 0.18 | 0.25 | 1.31 |
Khasib/Sad | 0.24 | 0.18 | 0.25 | 1.31 |
Mishrif | 0.22 | 0.28 | 0.25 | 1.34 |
Mauddud | 0.18 | 0.20 | 0.30 | 1.25 |
Nahr Umr | 0.20 | 0.25 | 0.30 | 1.25 |
Zubair | 0.24 | 0.19 | 0.40 | 1.35 |
Yamama | 0.19 | 0.16 | 0.30 | 1.43 |
Najmah | 0.15 | 0.17 | 0.25 | 1.43 |
Kurra Chine+ | 0.15 | 0.20 | 0.25 | 1.55 |
Akk36 | 0.15 | 0.20 | 0.25 | 1.55 |
Note: SW = Water saturation; FVF = Formation volume factor.
Our estimate was based on conservative volumetric calculations, using average porosity and 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 that were 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 an initial 70% falling to 25% at the end of the exploration period), giving 216bn barrels of proven reserves.
According to Iraqi semi-official publications there are 530 structural anomalies and leads, of which 239 are considered to have a high degree of certainty (some 70%), which are yet to be drilled. Our study identified around 440 surface structures and subsurface structural anomalies, identified from personal experience, geological maps and geophysical data. Around 40 structures are located in the High Folded Zone, a difficult mountainous area in which very little geological work has been undertaken. On further scrutiny and to err on the conservative side, a further major reduction brings the total to 231 anomalies. These are made up of 118 undrilled anomalies, in addition to the 113 anomalies which have been drilled, of which the majority, 106 anomalies, have prospective formations at their location. This brings the prospective anomalies with undiscovered reserves to 224.
Table 3: P&A Study Main Reservoir Pays
Age | Reservoir | Fields |
Tertiary: | Asmari | Buzurgan, Jabai, Fauqi |
Jeribe | Abu Ghirab | |
Cretaceous: | Hartha | Majnoon, Balad, Falluja |
Sadi | Majnoon | |
Tanuma | East Baghdad, Balad | |
Khasib | East Baghdad, Majnoon, Balad, Tikrit | |
Mishrif | ||
Rumaila | East Baghdad, Rumaila | |
Ahmadi | Majnoon | |
Mauddud | Majnoon, Abu Amud, Gharraf, Badra | |
Nahr Umr | Nahr Umr, Majnoon, East Baghdad, Halfaya, Safwan, Tuba, Abu Amud, Gharraf, Nasiriya | |
Zubair | Rumalia South & North, West Qurma, Safwan, Rachi, Tuba, East Baghdad, Buzurgan, Nasiriya, Siba, Kifl, Subba | |
Yamama | Rumalia, Ratawi, Amara | |
Jurassic: | Najma/Gotnia | Luhais, Samawa, Rumalia, Falluja |
Triassic: | Alan | Samawa |
The above table shows a number of significant reservoirs and discovered fields in the central and southern areas of the country. Each oil field is given its pay/s, reservoir, and geological age. The production capacity per well for any one reservoir pay is preliminary in nature, often quoted from initial tests that have neither been treated for enhancement or produced for sufficient production life to confirm its credibility.
Clearly, the production rates for the new reservoirs are tentative, but low production rates are well established in most fields and for almost all the new reservoirs reviewed above. Apart from the Cretaceous Zubair sandstone of the Rumaila South field, where the average production rate per well is some 15,000-20,000 b/d (and to a lesser degree the Zubair field with 4,000-5,000 b/d), typical rates elsewhere in the new fields further away from the Zubair and Rumaila fields are only some 10% of the above high rate Zubair sandstone. The newly discovered fields in the south, southeast and central areas give low production rates from newly developed reservoirs, as shown in Table 4 below.
Table 4: P&A Study Pays And Production Rate Per Well
Reservoir | Field | Production Rate Per Well, BOPD |
Jeribe/Asmari | Abu Ghirab Buzurgan | 1,500 2,000 |
Tanuma/Khasib | East Baghdad | 500-700 |
Mishrif | Zubair Rumala South Lubais Abu Ghirab Rumala North West Quma | 1,500 1,500 1,500 1,500 700 700 |
Nahr Umr | Nahr Umr Halfaya | 2,000 1,500 |
Zubair | Rumala South Zubair Subba East Baghdad Tuba | 20,000 4,000-5,000 2,000 1,500 1,000 |
Yamama | Ratawi Amara | 2,000-5,000 2,000-3,000 |
Najmah | Lubais | 1,500 |
Potential reserves by formation breakdown are given in Table 5 below. These yet to be discovered potential reserves appear to be in the following descending order: Najmah, Zubair, Kura Chin, Yamama, Mauddud, Jeribi, Hartha, Nahr Umr, Khasib/Sadi, 'Akkaz, Shiranish and finally Mishrif as shown in the table.
Table 5: P&A Study Potential Reserves At 100% Success (Bn Barrels)
Formation | Age | Reserves (B bbl) |
Jeribe+ | Oligocene & Lower Miocene | 41.58 |
Shiranish | Upper Cretaceous | 14.92 |
Hartha | Upper Cretaceous | 32.75 |
Khasib/Sadi | Upper Cretaceous | 20.75 |
Mishrif | Upper Cretaceous | 4.33 |
Mauddud | Upper Cretaceous | 42.35 |
Nahr Umr | Upper Cretaceous | 24.33 |
Zubair | Lower Cretaceous | 67.19 |
Yamama | Lower Cretaceous | 50.83 |
Najmah | Lower Cretaceous | 77.68 |
Kurra Chine+ | Jurassic/Upper Triassic | 62.72 |
Akkas | Paleozoic | 15.48 |
Total | 454.89 |
The reserves of the Mishrif have proved much larger as a result to the oil presence covering a much more extensive area than previously assumed and the use of a higher recovery factor. The total ultimate undiscovered potential reserves are thus 455bn barrels of oil. This estimate was, however, based on an exploration success of 100%. Accepting that the high initial success ratio of 70%, which has been the norm in Iraq, will decrease with time to a conservative cut-off level of 25%, the average success ratio of 47.5% during the remaining exploration period, gives ultimate undiscovered reserves of 216bn barrels. The undiscovered reserve per drilled anomaly of about 1.0bn barrels is of the same order of magnitude, if slightly smaller, than the 1.2bn barrels for discoveries to date. The study indicates that there are super-giant fields, the largest of which could be comparable to the super giant Kirkuk or Rumaila fields. However, the distribution is more even than the oil discovered so far, since the first eight fields of undiscovered reserves represent about 23% of total undiscovered reserves, while the comparable figure for discovered reserves is higher than 70%. They show a significant number of giant fields, with some 30 structures, each with more than 2bn barrels of recoverable reserves, with an average of just under 4bn barrels each.
With access to a substantial database on Iraq, Iraq National Oil Company (INOC) estimated that 212bn barrels of oil is yet to be discovered, which is remarkably close to the estimate obtained in this study. Without more information on the details of their calculations it is difficult to compare the two results, but it seems that we have fewer anomalies on which future discoveries are to be made, while our average discoveries are larger. An attempt was made to use a probabilistic approach to estimate undiscovered reserves, but a deterministic approach was finally accepted to be more appropriate, taking into consideration the data available and the scope of the study. The size distribution of reserves in Iraq shows typical log-normal distribution. An examination was carried out of the distribution of all Iraqi ultimate and potential reserves.
Exploration (Finding) Cost And Potential Reserves
The drilling costs for Iraq Petroleum Company (IPC) and associated companies to 1960 and for INOC to 1980 have been analyzed and plotted according to cost per foot vs depth, on a semi-log graph, to facilitate cost estimates for exploration wells to the desired depth in the absence of known well costs. For the IPC and INOC periods, the assessed cost for an exploration well is $1.1mn and $2.3mn respectively. Pre-geophysical, geological and overhead costs are estimated at 50%, giving total costs of $1.65mn and $3.5mn. Dividing these costs by their respective discovered reserves gives a weighted exploration intensity of 0.32 cents/B.
Table 6: Iraqi Oil Finding Costs (1997 $)
Basra Petroleum Company (BPC) | 0.10 cents/B |
Iraq Petroleum Company (IPC) | 0.35 cents/B |
Mosul Petroleum Company (MPC) | 5.60 cents/B |
Iraq (overall) | 0.26 cents/B |
The IPC and associated companies’ accounts provided another estimate that is comparable to the above. The exploration cost (intangible assets) given in the IPC accounts for each company was adjusted to reflect the replacement value at the end of 1960 and then to 1997 by the use of appropriate inflation indices. The exploration costs so derived for each company amounted to $43.59mn (BPC), $88.2mn (IPC) and $16.08mn (MPC). Dividing their total cost by the discovered reserves would give a comparable, less if anything, cost to the above, ie a fraction of a US cent per barrel.
Today, with exploration success of 70% being maintained, the finding cost would very well be a fraction of a dollar. How will this affect the exploration for potential oil reserves? Since the finding cost, as highlighted above, is under 1 cent/B or only a fraction of a per barrel associated with a discovery success of 70%, surely it should be economically prudent to intensify exploration and sustain it to a much lower cut-off level than the one assumed in our study, as long as the finding cost remains within acceptable range, particularly in view of the prevailing oil prices. Thus the potential reserves would be larger than estimated above.
Almost half of the anomalies have been eliminated. Only the simplest of traps have been considered, the simple structure being a reflection, no doubt, of the prolific nature of the oil industry in the Middle East. No doubt, the time will come when it becomes necessary and profitable to look into more complicated traps, such as stratigraphic traps.
Proven Reserves
The published proven reserves figure from semi-official sources stood at 112bn barrels during 1997 when our P&A study was carried out. The reserves were distributed (according to the same sources) in 73 fields, nine of which are super-giant or giant fields (Kirkuk, South Rumaila, North Rumaila, West Qurna, Zubair, Majnoun, Nahr Umr, Halfaya, and East Baghdad) and 22 are large fields.
Age-wise, the reserves comprise: 23.9% Tertiary; 76% Cretaceous; and only 0.1% Jurassic/Triassic. Our estimate, based on ‘best judgment’ of ultimate reserves assigned to each individual field or discovery, provides a total ultimate reserves figure of 125bn barrels in 79 fields. According to our study of 1997, the distribution of the reserves is: 23% Tertiary; 73% Cretaceous; and 4% Jurassic/Triassic (see Table 7).
Our field by field reserve estimate referred to above was based on a review of reported reserves by specialized sources (Oil & Gas Journal, World Oil, MEES etc), the Iraqi Ministry of Oil news journals, OAPEC country reports and leading authors. These were examined against relevant information such as the field’s historical production profile or announced plans. In-house experience and personal enquiries came into play in arriving at ‘best judgment’ reserve figures assigned to these fields.
Our ultimate reserve was then estimated at 125bn barrels. It gives a present (1997) proven (remaining) reserve figure of 101bn barrels, which is sufficiently close to the BP Statistical Review estimate of remaining reserves for Iraq of 100bn barrels at that time in 1996-97. Our estimate, however, included 37 discovered fields, assigned only 100mn barrels per field. Many of these have since been considered for development. One would expect a considerable number of them to prove to hold substantially larger reserves. A recovery factor as low as 31% was used when 35% had been assessed as a global average by BP a decade ago. With a crude oil price floor around $50/B and a near future of over $100/B and present Iraq capital investment cost of $1.5-2.5bn, additional secondary recovery cost would permit higher reserves recovery.
Iraq’s Oil Resource Base
A comparison of the present reserves with the potential, which make up the resource base, is given in Table 7 below.
Table 7: Iraqi Oil Resources(Bn Barrels)
Age | Discovered Reserves | Potential (undiscovered) Reserves | ||
B bbl | % | B bbl | % | |
Tertiary | 27.2 | 22.8 | 19.6 | 9.1 |
Cretaceous | 87.6 | 73.3 | 159.2 | 73.7 |
Pre-Cretaceous: | 4.7 | 3.9 | 37.1 | 17.2 |
i. Jurassic/Triassic | - | - | 29.8 | 13.8 |
ii. Paleozoic | - | - | 7.3 | 3.4 |
Total | 119.5* | 100 | 216 | 100 |
Iraq’s oil reserves have stood at 115bn barrels until last October, when the Ministry of Oil announced a revision to 143.1bn barrels, while the potential reserves stood at an estimate of around 215bn barrels, which is in line with the only study of the ministry’s at 212bn barrels and our P&A estimate of proven and potential reserves at 120bn barrels and 216bn barrels in the 1997 study. The Tertiary reserves will add some 19.6bn barrels, the Cretaceous some 159.2bn barrels, maintaining its high share of the total, and the Pre-Cretaceous some 37.1bn barrels to increase its share of the total. It is anticipated, however, that the Pre-Cretaceous will at least be double the estimate here, since during the time of our study in 1997 there has been no seismic or exploration drilling carried out, while recently much exploration has been carried out in the northeast, uncovering substantial amounts of reserves.
Iraq Latest Reserves Increase
The Ministry of Oil, in its latest announcement of October, considers 34% recovery is applicable to 66 ‘upgraded fields’. Iraqi reserves have been revised to 143.1bn barrels. The super-giant West Qurna field recovery rate is now 42%, giving it 43.3bn barrels and super-giant Kirkuk field has the highest recovery factor of 58%. Complex fields have a recovery factor of around 15%. The bulk of the increases reserves came from West Qurna, where the reserves were doubled to 43.3bn barrels. Past practice limited the recovery to 15-31% for most of the fields with the exception of Kirkuk and Rumaila, which were given a higher recovery factor.
Iran used small increases across various fields to justify its modest jump to 150.3bn barrels from 138bn barrels in a hurry to beat Iraq. It has been reported that Iran uses an average recovery rate of 20-25% to calculate its reserves. This, indeed, assumes very conservative estimates, though may prove to be generous for newer fields like Azadegan, where the likely figure may be around 10-15% judging by the generality of its oil and reservoir characteristics.
Saudi Minister of Petroleum and Mineral Resources Ali Naimi addressed the issue recently, saying: “Initially when a field is discovered, they say ‘We can recover 17%’ because they don’t have any experience with producing that field. As time goes by and they drill more wells and see the reaction of the reservoirs, they say, ‘Well, I think we can recover 35%.’ And finally the average that the industry believes can be done is about 50%, and 50-60% at fields like Ghawar is within reach.” BP had achieved 50% over a decade ago in the North Sea, and 60% had been achieved but sparingly in the North Sea and elsewhere. The industry target is 70% and above. However, to extract oil from the very marginal fields, oil prices above the present floor of $40-50/B would have to support capital costs at a higher level than currently prevail.
Conclusion: Iraq’s Reserves
While higher recovery rates in Iraq should prove fairly likely, these can be justified following future production observations of sweep efficiency and relevant reservoir parameters with the aid of 3D seismic surveys. Oil/water and oil/gas contact levels and subsurface pressures are examples of factors that enable material balance calculations be made to ascertain the validity of recovery rate estimates.
Uncalled for conservatism in estimating reserves can be as costly as in optimistic estimates. The cost of oversized production infrastructure beyond the fields’ boundaries to the export flange (such as transfer lines, storage tanks and terminals) represents a waste of capital investment and so is the case for under-designed capacity. The latter is just as costly as it eventually requires additional capital investment with a loss of the economies of scale. Iraq’s use of recovery rates below global averages accounts, in part, for Iraq’s past adoption of outdated technology and mal-production practices during the periods of the Gulf Wars, sanction years and the present time since 2003. Kirkuk and Rumaila have had their share of potential damage.
Iraq’s 441,840 sq km area is almost entirely underlain by Silurian and/or Jurassic and Cretaceous rich, sufficiently mature source rocks, sparsely drilled at one exploratory well per 2,900 sq km. Iraq is the least explored major hydrocarbon resource basin in the Middle East. Large parts of the country are still virgin, with huge untapped resources. In-house reinterpretation of seismic at the present time using the latest software indicates the presence of large number of stratigraphic traps and many more structural anomalies than the delineated 530. The new identified stratigraphic traps and structural anomalies, remaining identified undrilled ones, the untested shows, the many discovered fields especially those in the south which are yet to be tested for their deeper horizons (Lower Cretaceous, Jurassic and Triassic), and Jurassic/Triassic oil reserves in the relatively virgin Western Desert and the Folded Zone along the Zagros belt, will no doubt increase Iraqi oil reserves to or even beyond the above estimates. By way of an example, exploration in Iraqi Kurdistan has given estimated reserves in excess of 40bn barrels and an exploration success in line with Iraq’s overall average of 70%. Neither these fields’ proven reserves nor their potential has been included in the above estimated reserves.
On the basis of the above studies, potential reserve growth from future discoveries and likely future enhanced recovery of Iraq’s oil, the present estimates of proven reserve of 115bn barrels and a potential reserve in excess of 216bn barrels should prove fairly certain, with a high probability to be exceeded. The total present Iraqi oil resource base of 331bn barrels assumed at 31% recovery, an improvement by 15% (well within the future art of technology and Saudi present achieved recovery) would make Iraq’s resource on a par with Saudi Arabia’s, if not higher.
Can Iraq Achieve Anticipated Production Of 12 Mn B/D?
At an annual depletion rate (production/reserves – P/R) of 4-5%, Iraq can continue its production rate increase to 10mn b/d and beyond to 12mn b/d conditional on, in the case of the latter rate, adding new potential reserves so as not to exceed the above depletion rate. While developing 10mn b/d is achievable within good oil industry practice at an annual depletion rate of 4-5%, with no exploration the results are not as robust, but still robust enough.
Production capacity is a function of the remaining recoverable reserves, potential reserves and the rate at which the latter are discovered. Production from an oil field or a group of fields takes a bell-shaped curve, sometimes referred to as the Hubbert Curve, a symmetrical curve whose peak is followed by an exponential decline. Building Iraq’s current production rate to a peak of 10mn b/d and maintaining the plateau for eight years would require a P/R of 4% at the beginning, rising to 5.3%, when it is allowed to decline. At the end of 25 years the production rate would be 6.4mn b/d, but the reserves would have declined to some 42bn barrels from 115bn barrels at the start of the build-up.
To build up to 12mn b/d and maintain P/R at 4-5% would require additional reserves to supplement the current 115bn barrels remaining. In this case, additional reserves of 3bn barrels per year need to be added, starting from the seventh year. The plateau is maintained for eight years as the remaining reserves decline to 98bn barrels. By the end of the 25th year, the production rate is 11mn b/d and the remaining reserves are 91bn barrels, with the P/R being kept within the desirable depletion. A total of 57bn barrels from new discoveries have to be added, which represents only 26% of Iraq’s likely potential reserves. The production rate at the end of the 25 years is still a healthy 6.4mn b/d, and the remaining reserves at that time some 48bn barrels.
Production of 12mn b/d requires additional total reserves of 57bn barrels, which is fairly feasible to be added at an advanced stage of development at an annual rate of 3mn b/d, to ensure sustaining a healthy depletion rate at 4-5%. And, conservation of reservoir energy and optimum reserves recovery at least cost can be at risk if and when the highest production plateau is pre-determined, as the case in Iraq’s contracts, ignoring the uncertainty associated with prejudging its level. There is an intrinsic relationship between depletion rate of reserves and recovery. A balance between the two can only be obtained by development in stages while observing and evaluating reservoir reaction.
Iraq’s oil service contracts commit some 83bn barrels to attain a plateau of 12mn b/d. This requires a higher depletion rate than 5%, which could well risk achieving less than the optimum recovery and would likely be at a higher unit cost. Therefore, the oil production plateau and its targeted duration stipulated in Iraq’s contracts ought to be complemented not only by the anticipated enhanced recovery but also by additional reserves from within and/or without the contracted fields.
Copyright MEES 2011.
