RESERVES

Iraqi oil reserves show great potential

 Among OPEC Middle Eastern producers, Iraq holds the greatest promise for adding substantial oil reserves and production. Reserves may be significantly understated. 

Dr. Hussain Rabia, Managing Director, Entrac Petroleum Ltd., Reading, UK

According to various literature, Iraq contains between 110 billion and 115 billion bbl of oil, and 112 Tcf of gas.¹ These estimates put Iraq third in a listing of global reserves, Table 1.

TABLE 1. Proven oil reserves of some major OPEC countries, 1980–2003, billion bbl

The 115-billion-bbl figure comes from OPEC sources, Table 1. However, other estimates come from well-respected international bodies, including: 200 billion bbl by Petroleum Economist magazine, 215 billion bbl by the Federation of American Scientists, 220 billion bbl by the Council on Foreign Relations and the James A. Baker III Institute at Rice University, and 300 billion bbl by the Centre for Global Energy Studies and Petrolog & Associates. This last estimate puts Iraq ahead of Saudi Arabia, implying that Iraq contains 25% of world oil reserves. The term, oil reserves, refers to liquid oil and gas, and not to oil sands and other solid hydrocarbons.

Variations in the above values stem from the inexact science of reserve estimation. Reserve estimates are controlled by various technical factors and, unfortunately, political factors. The latter are used to increase an OPEC country’s oil reserves to enhance its bargaining power, or, in a non-OPEC country, to attract foreign investment. This article concentrates only on technical factors used to estimate reserves.

In terms of reserves, most experts agree that Iraq is the world’s last unexplored oil province, despite being a producer since the 1930s. Since oil was discovered in the 1920s, the country has never had a long period of political stability. This has precluded proper planning and development of resources.

The outline below is a brief walk through Iraq’s oil history:

• 1923—First oil discovery in the Naft Khana area
• 1939-1945— World War II; Exploration stops, as Iraq is a British protectorate
• 1948—Zubair field discovery
• 1953—Rumaila field discovery
• 1958—Overthrow of the monarchy and establishment of a republic state
• 1960—Law No. 80 introduced
• 1961—Implementation of above law and suspension of IPC exploration. Law 80 is introduced, limiting exploration in Iraq to the Iraqi National Oil Co.
• 1973—Arab-Israeli war; Iraqi oil production is temporarily suspended
• 1981-1988—Iraq/Iran war; oil production is interrupted. Investment in oil industry is greatly reduced. Limited exploration drilling is carried out
• 1991—Iraq invades Kuwait, oil production stops
• 1991–1996—Global sanctions on Iraq
• 1996–2003—Oil for food program allows about 2 million bopd to be sold
• 2002 ( April)—Iraq suspends oil exports for a month in support of Palestinian uprising
• 2003—US invades Iraq, oil production stops
• 2004–2005—Oil production nears 1.8 million bopd

IMPORTANCE OF IRAQI OIL

In the US, proven oil reserves are put at 29.4 billion bbl, and at current production rates, these reserves will only last for 10 years. In the North Sea, Britain’s revised reserves are 4.5 billion bbls, lasting for just over five years at current production rates. Similarly, the other major European oil producer, Norway, will see its estimated reserves of 9.7 billion bbl used up in 8.7 years, if current production is maintained.

The major OPEC producers—Saudi Arabia, UAE, Iran and Kuwait—are all producing at full capacity and would require major discoveries to substantially add to their output. The Caspian Sea countries’ oil reserves have not met earlier expectations of being the next, collective “Middle East.” Best estimates are now at about 47.5 billion bbl.¹ Additional oil production and reserves have to be found within the next five years, if increasing world demand (about 82 million bpd) is to be met while maintaining global oil reserves of 1.189 trillion bbl. In addition, it takes roughly 3-5 years to put a major oil field into full production. There is only one country in the world that can immediately fill in gaps, namely Iraq.

WARS, WARS AND NATIONALIZATION

Iraq has suffered more than most any other nation on earth, having being governed and run for a very long time by dictators utilizing incompetent family members, friends and party activists to run the domestic oil industry. Their lack of expertise and foresight has largely contributed to the industry’s deterioration. Oil revenues were never used for re-investment necessary to improve the industry infrastructure or, indeed, used for re-building the country’s infrastructure, Fig. 1. This neglect was most noticeable in the vital, oil producing southern states.

Fig. 1. The effects of wars and central government neglect can be seen on drilling rig components.

In addition to the above, and since 1973, Iraqi governments have entered into three major wars and have been involved in several internal conflicts. The author emphasizes the word, governments, and not the Iraqi nation, as these regimes were not elected and came to power through military coups.

Perhaps one of the biggest mistakes in Iraq’s history was nationalizing its oil industry in 1972. The then-ruling Baath party believed that this move would modernize the industry and put it firmly in the hands of the Iraqi people. This thinking was largely misguided, as foreign investment and expertise necessary for developing the industry vanished completely, leaving Iraq entirely dependent on its own resources.

The absence of foreign involvement in Iraq was not felt immediately, as the price of oil went up sharply in 1973 (after the Arab-Israeli war), allowing the country’s oil revenues to increase substantially, as compared to before nationalization. The ruling regime used this as a proof that nationalization really worked. Eventually, as the oil price stabilized and revenues remained virtually the same (allowing for inflation), it became apparent that the country could not sustain the costs of new exploration and development projects. Vast areas of Iraq were left unexplored, and even when discoveries were found, there was no money or appropriate technology to go forward with field developments. Parallel with this, Iraq went through two major wars (1981-1991) and 13 years of international sanctions that prevented the industry from being able to buy even the most basic equipment for maintenance.

The effects of wars and bad management profoundly impacted development of Iraq’s industry. The total number of wells in Iraq is around 1,500. Compare this figure with a small country like Oman, where 2,600 wells were drilled during the last 20 years. In industry terminology, large numbers of wells translate (usually) to more production. This is particularly valid for giant and super-giant fields, where reservoirs are too extensive (in length and width) to be exploited by a few wells, as would be the case for a small-to-medium North Sea reservoir.

The author believes that Iraq will one day regard nationalization of its industry as the biggest mistake in its history and as one of the major reasons for economic deterioration. Indeed, had major oil companies remained working in Iraq, the regimes would not have dared to enter into any war with Iraq’s neighbors. Accordingly, the country would have progressed and prospered in excess of the current UAE.

TECHNICAL BACKGROUND: GIANTS AND SUPER-GIANTS

Iraq encompasses about 4 million cubic km of sedimentary rocks that are part of the Middle Eastern Petroleum basin that contains roughly two-thirds of global oil reserves. In Iraq, the thick sedimentary succession spans most geological ages, from Cambrian to Recent, and contains prolific producers requiring comparatively easy and inexpensive drilling and development programs. The first Iraqi oil field was discovered in Naft Khana in 1923, after an appraisal period starting in 1919.

Most experts familiar with the situation believe that the majority of the world’s undiscovered oil reserves lie within the sedimentary rocks of Iraq. This is because, since the early 1970s, the majority of adjacent Middle Eastern countries had extensive seismic and exploration drilling to delineate new reservoirs. Simply stated, the chances of discovering new fields in other Middle Eastern countries are very small in comparison to Iraq. This is because Iraq had some modest seismic activity during the 1970s, but this was conducted without a parallel program of exploration drilling to delineate and prove new reservoirs.

Still, modest drilling has revealed the existence of multi-source, multi-reservoir and multi-cap rocks, plus the abundance of petroleum systems within various geological periods.2 Statistically, over 500 seismic anomalies and geological structures were identified. Of these, only 124 have been drilled.

In these structures, about 64 super-giant and giant oil and gas fields were discovered. However, only 23 fields were actually developed and put on production.² Even in these 23 fields, the vast majority of wells are vertical, with no horizontal or multilateral technology employed. Furthermore, the technology employed to drill and complete these wells is from the 1970s. Readers should note that the literature cites 73 discovered fields. However, the author is only concentrating on large fields for the purpose of estimating oil reserves.

A remarkable feature of Iraqi oil reserves is that the majority lie within 10,000 ft of the surface, with 30-40% lying within 2,000-5,000 ft. The majority of oil production comes from Cretaceous reservoirs (76%), with the remainder coming from Tertiary reservoirs (24%). A very small amount of output (0.1%) comes from Jurassic, Triassic and Ordovician reservoirs.³

Iraq’s exploration success rate is 2 in 3 (about 67%), compared to the world average of 1 in 10. Moreover, oil development costs are less than 50 cents/bbl, while other major costs are transportation and passage. Iraq has only one outlet to the sea at Basrah, and some of its oil passes through countries like Turkey, where transit costs are paid.

Forty-one discovered oil fields require full-scale development, including the super-giants of Majnoon, Nahr Umr, Halfaya⁴ and West Qurna. Together, these discovered fields could help Iraqi production reach 6 million bopd in the near-future and possibly to 10 million bopd by 2015. It is estimated that a $4-billion investment is required for each 1 million bpd added to capacity through development. The present Iraqi economy would certainly require external investment.

WESTERN DESERT

Notwithstanding the above, there is still the promise of the Western Desert, which saw some limited 3D seismic activity, to explore the area’s Paleozoic potential. According to Dr. Sabah Mohammed,² the majority of interpretation studies were carried out manually until 1986, when this process was backed up by introduction of a VAX 11-780 interpretation system, and later by the Landmark Graphics Workstation IV.

This interpretive work resulted in hundreds of reports, and the discovery of hundreds of seismic leads and prospects. A very limited exploration drilling campaign revealed oil and gas in the majority of drilled structures. Unfortunately, the Western Desert’s full seismic results could not be utilized, as Iraq was under sanctions from 1991 until 2003. During the sanctions, there was a severe embargo on all imports into Iraq. In particular, imports that were chemical in nature were banned. This policy virtually ruled out many mud chemicals necessary for drilling and well logging. At present, it is almost impossible to quantify the Western Desert’s reserves. However, the US DOE estimates as much as 100 billion bbl of oil.

PRODUCING FIELDS

Iraq has around 1,500 wells, 1,000 of which are in its southern states. The majority of production comes from four fields: Rumaila, Zubair, West Qurna and Nahr Umar. In the North, major oil production comes from Kirkuk, with Bai Hassan following in second place. Jambur and Khabbaz are the only other fields producing oil in northern Iraq.

DISCOVERED BUT UNDEVELOPED FIELDS

For purposes of brevity, discussion will be limited to just one large field that was discovered but is not yet developed. This is Halfaya field.⁴

Halfaya lies in southern Iraq, and was delineated and discovered over 25 years ago. Yet, it is considered as one of five super-giant fields still awaiting development. Structure size is about 30 km long by 10 km wide. There is a structural closure that increases with depth, ranging from 70 m in the Tertiary reservoirs to 190 m in the Middle Cretaceous Mishrif reservoir, and reaching 230 m for the Lower Cretaceous Ratawi/Yamama reservoirs.

So far, just five wells have been drilled in this super-giant field, confirming the presence of eight pay zones, ranging in age from Miocene/Oligocene to Lower Cretaceous, with API gravity ranging from 21° to 31°. Main reservoir is the Mishrif group, with a net pay thickness of over 300 m. On test, flow from the Mishrif limestones reached 2,500 bopd, and 12,500 bopd from Nahr Umr, with reservoir permeabilities reaching up to 3,500 mD. The field can produce a minimum of 250,000 bopd.

Halfaya’s estimated total reserves in place are over 16.1 billion bbl of oil and 9.3 Tcf of gas. This clearly places Halfaya as one of the most attractive, super-giant fields still awaiting development.⁴ Developing one super-giant or giant field in Iraq can increase oil reserves by at least 10-15 billion bbl, or 9-14% above estimates.

Several other fields that fall in the same limbo status as Halfaya can contribute significantly to production and reserves, Table 2. While not every discovered field will prove as large as Halfaya, one can assume that other fields that encounter formations similar to Rumialah, Zubair or Halfya will be prolific producers with substantial reserves. The most obvious development targets are the middle Cretaceous Mishrif reservoir and the lower Cretaceous Yamama reservoir in the southern fields; the Jurassic Najmah reservoir in Rumaila and West Qurna fields; and the Cretaceous reservoirs in the north.

TABLE 2. Selected Iraqi oil fields-proved hydrocarbons

DRILLING SINCE 1981

As mentioned earlier, Iraq has roughly 1,500 wells, of which 1,000 are in the south. Not all wells are producers—some are injectors, observation wells and abandoned wells. Iraq has 20 drilling rigs, of which only 10 are fit to work. Iraq also has 16 workover rigs, but only eight are operable. The number of wells drilled from 1991 until the beginning of 2005 is 248. For the same period, the number of wells worked over is 655.

As will be discussed later, an integral part of assessing reserves is to drill a large number of wells to determine the total number and extent of reservoirs within the same field; to assess the full flow capacity of the reservoir(s); and, more importantly, use actual production data (materials balance equation) to confirm the amount of oil in place. Iraq has never had the opportunity to carry out a large drilling program to assess its huge reserves. Hence, one can extrapolate the oil reserves from new horizons by referencing to existing reservoirs and near-by countries containing similar formations.

Without extensive exploration that may take up to 15 years, oil reserves cannot be assessed accurately. Critics may use this argument to doubt any figure quoted for Iraqi oil reserves. However, our current technical knowledge should provide us with a good enough estimate for the purpose of future planning.

JURASSIC RESERVOIRS

In Iraq, giant reservoirs of Jurassic age exist in fractured carbonate and dolomitized carbonate platforms. These reservoirs are created by hot dolomitizing fluids arising from salt beds above, and by oil creating a complex fractured reservoir system with almost perfect sealing on all sides.⁵ Studies have shown that dolomitization of reservoirs occurred simultaneously with oil migration. Reservoir quality depends on fractures and secondary porosity. Reservoir thickness can be up to 300 m.

The Jurassic basinal source rocks outcrop in northeastern Iraq and southwestern Iran, and are used by local people for fuel, mistakenly labeling these source rocks as coal. The excellent paper by J. Goff of BP,⁵ on which this section was based, provides a detailed description of these reservoirs.

These Jurassic reservoirs are deeply buried and contain very high pressures and large quantities of H₂S. They are generally regarded as HPHT reservoirs, with bottomhole pressures approaching 20,000 psi. The technology for developing such reservoirs is readily available from the global industry.

 Still, development of these reservoirs will be very challenging and expensive, and will require a minimum of five years for oil to be brought onstream. In Iraq’s current politics, observers may argue that this delay works to the advantage of the Iraqi people, as it provides sufficient time to develop other easily accessible reservoirs with lesser pressures and temperatures, and fewer requirements for advanced technology.

The generated oil in the Jurassic reservoirs is estimated at 5-10 trillion bbl of oil, with possible, trapped oil in place of 1-2 trillion bbl. If only 25% of the 1-2 trillion bbl is in definable accumulations, and the recovery factor for these reservoirs is only 20%, the yield of recoverable light oil will be 50-100 billion bbl. The 100-billion-bbl figure almost equals the entire, current estimate of Iraqi oil reserves.

The author has chosen a very low estimate, to avoid accusations of exaggerating Iraqi oil reserves. Industry professionals would agree that the above recoverable figure could easily be doubled using modern recovery techniques.

Evidence. A number of deep exploration wells drilled in Kuwait’s lower Jurassic rocks, and at least one well drilled into the Najmah formation beneath Rumialah oil field in southern Iraq, have struck light oil. A sustained, future exploration program will better delineate most productive Jurassic reservoirs.

ESTIMATING RESERVES

Oil and gas reserves are established by physical methods, including seismic, geological, drilling, logging, well testing and production methods. By far, the most accurate method of estimating oil reserves is based on actual production data, followed by geological estimation. Full details of methods of estimating reserves are available.⁶ Reserves are classified in three ways:

• Proved reserves: High degree of certainty
• Probable: Lesser degree of certainty than proved reserves
• Possible: Low degree of certainty compared to probable.

A fourth category may be added: Prospective reserves. This category has a very high degree of uncertainty, as no wells have been drilled in the prospect. It is a requirement that proved, probable and possible estimates are based on actual wells drilled in the prospect.

For each of the above classifications, a degree of uncertainty is associated with the value to reflect the probability of recovery. The best recoverable figures in the industry are in the Norwegian fields, and they average at about 60%. In Iraq, the recovery factor is estimated at around 40-45%.

In many cases, proved reserve estimates were often found to be on the low side, and the actual reserves were found to exceed estimates. As a rule, it is unlikely that the actual remaining reserves in the ground exceed the sum of the proved, probable and possible reserves.

Each of the above classifications is also divided into two types: developed and undeveloped.⁶ Developed reserves are those reserves that are expected to be recovered from existing wells and installed facilities. Undeveloped reserves are those reserves expected to be recovered from known accumulations, where a significant expenditure (e.g. when compared to the cost of drilling a well) is required to render them capable of production.

Readers should note that proved, probable or possible reserves are assigned only to known accumulations that have been penetrated by a wellbore with a well testing program. Potential accumulations that have not been penetrated by wells are termed Prospective Reserves.⁶

The methods used to estimate the quantity of oil reserves are: volumetric, material balance and production decline analysis. The most accurate method is the material balance, as it is based on actual production data, and the analysis takes into consideration the reservoir pressure behavior as hydrocarbon fluids are withdrawn. The volumetric method is the least accurate, as it only considers rock volume but not the mechanism of fluid flow within the reservoir, which is essential for estimating the actual recoverable oil. Production decline methods involve the analysis of production behavior as reservoir fluids are withdrawn. For accurate and consistent results, a sufficient period of stable operating conditions is required.

MINIMUM POSSIBLE RESERVES

Table 2 details Iraqi producing fields and shows proved reserve volumes, together with depth and type of hydrocarbon. The total estimate is around 110 billion bbl of oil.

Table 3 summarizes the statistics given in the bulk of the article, and those given in Table 2. It shows current estimates in column 1 and estimates from discovered but undeveloped reservoirs in column 2. Here, only one field is used, to provide minimum values for estimates.

TABLE 3. Summary of oil reserve estimates, billions of bbl

Column 3 gives estimates for extra reserves, if EOR is used. EOR’s influence, through the use of horizontal and multilateral technology, can easily increase the recovery factor from 45% to 55%. This is still well below Norway’s figure. This 10% uplift in recovery will have a corresponding minimum increase in recoverable reserves of 11 billion bbl (10% of 110 billion). In column 4, data were taken for possible extra reserves, obtained from within existing fields of undeveloped shallow and deep horizons. The estimate from this is 10.91 billion bbl, although personal communication by the author with a number of Iraqi oil experts indicates that this figure may be substantially higher.

In column 5, the estimate comes straight from the US DOE. The only prospective value in this table is in column 6, referring to potential in the Jurassic formations. If estimates from the Jurassic formations are not included, then Iraq’s total minimum reserves are on the order of 249 billion bbl of oil, more than twice the estimate. If one includes prospective reserves in column 6, then Iraq’s total minimum reserves rise to about 324 billion bbl of oil, roughly three times the current estimate.

CONCLUSIONS

Table 3 shows that Iraqi oil reserves are substantially higher than the quoted value of 110-115 billion bbl. At a minimum, Iraqi oil reserves may be as much as 249 billion bbl, and perhaps as high as 324 billion bbl. The minimum figure of 249 billion bbl is more than twice the estimated value. Oil reserve estimates given in Table 3 make Iraq, by far, the world’s largest country for potential oil reserves.   

 

LITERATURE CITED

 ¹ BP, Statistical Review of World Energy, June 2005.
² Sabah Mohammed, expert exploration geophysicist, Ministry of Oil, Iraq (2005), “Seismic activities in Iraq,” Iraqi Petroleum Conference 2006, London, organized by Entrac Petroleum Ltd.
³ Geodesign website information, 2005.
⁴ M. Al Gailani, “Halfaya field: A twenty-first super-giant field,” Iraqi Petroleum Conference 2006, London, organized by Entrac Petroleum Ltd.
⁵ J. Goff, “Origin and potential of unconventional Jurassic oil reservoirs on the Northern Arabian Plate,” SPE paper 93505.
⁶ “Definitions and guidelines for estimating and classifying oil and gas reserves,” Jan. 25, 2002, Draft For Public Comment, Petroleum Society of CIM, Standing Committee on Reserves Definitions, Alberta Energy & Utilities Board, Calgary.