Iraq mulls building an island to boost oil-exporting capacity

By Khalid Al-Ansary on 3/19/2018

BAGHDAD (Bloomberg) -- OPEC’s second-biggest producer is ramping up efforts to expand capacity to pump and export oil, with plans that include the injection of seawater into crude deposits and the construction of export facilities on a man-made island in the Persian Gulf.

Iraq is seeking bids from six companies for an estimated $4-billion project to inject seawater into its southern oil fields to dislodge more crude from the deposits, Ihsan Abdul Jabbar, the director-general of state-run Basra Oil Co., said in an interview. The country has already received bids from five companies interested in building a processing facility to double output at the Majnoon field to 450,000 bpd, he said, without identifying the bidders.

Iraq is also studying a proposal with a Dutch company to build a 10-MMbbl storage facility and an oil-exporting terminal with a capacity of 2 MMbpd -- all on an artificial island off the country’s Gulf coast, Abdul Jabbar said in Basra.

“Let’s say we have rough weather. The tankers will be taken to a safe zone, and when the rough weather ends, we will have many vessels and not all will be able to come for loading as the waiting area will be busy,” he said. “But if we have more than one terminal, once the rough weather ends, they all can come to get crude loaded.”

Giant fields

Iraq has sought to boost oil sales from its southern region, which includes giant fields, such as Majnoon and Rumaila, to offset a loss in production in the north where a dispute with the semiautonomous Kurdish region has crippled pipeline exports through Turkey. Iraq pumped 4.43 MMbpd in February, second only to Saudi Arabia in the Organization of Petroleum Exporting Countries. It sees output capacity at 5 MMbpd by the end of next year, even as it commits to capping production under a global oil-cuts deal.

State-run Basra Oil targets an increase in production to 3.5 MMbpd by the end of the year from 3.15 million currently, Abdul Jabbar said. It plans to pump 4.5 MMbpd by the end of 2022, with gains at all fields in Basra Province, he said.

Oil producers pump water into oil fields to enhance crude recovery. Initial bids for Iraq’s seawater-injection project are due by April 15, and the government expects to award the work before June, Abdul Jabbar said. Iraq is talking with ExxonMobil Corp. and PetroChina Co. about aspects of the project, Abdul Mahdy Al-Ameedi, the Oil Ministry’s director-general for upstream oil contracts, said last month in Berlin.

Export flexibility

The country plans separately to increase output at the southern deposit of West Qurna-1 to 480,000 bpd by December from 450,000 bpd, Hassan Mohammed Hassan, head of the field’s joint management committee, said in an interview in Basra. Output at the field will jump to 800,000 by the end of 2022, he said.

An artificial island with storage and shipping facilities for crude would contribute to Iraq’s strategy of maintaining an exporting capacity that exceeds its production, Abdul Jabbar said. This is “a must,” to ensure flexibility in case an accident or foul weather disrupts exports from any one oil terminal, he said.

Each of Iraq’s four single-point mooring offshore facilities can export as much as 900,000 bpd, and a fifth is under construction, Abdul Jabbar said.

“If damage occurs to one of the jetties, the maintenance takes months. If we have rough weather, it also takes two days from export capacities,” he said. “To secure your business, export capacities must be 1.5 times greater that output capacities to overcome any problems of having output but being unable to export.”

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