Rebirth of Rumaila

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REDEFINING REFINING With Dr Eion Turnbull, Deputy CEO of Bapco FIELD OF DREAMS KOC’s exploration chief, Khalid Al-Sumaiti, outlines the company’s 2030 vision BRIGHT SPARK Gerald Schotman, CTO of Shell, on the oil giant’s innovation strategy BAHRAIN’S OPPORTUNITY Minister of Oil and Gas Affairs HE Dr Abdul-Hussain Ali Mirza on why the future is bright for his country’s energy sector SPECIAL REPORTS Yemen’s energy outlook Untapped potential in Iraq www.ngoilgasmena.com Q2 2010

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Maxim Lyashko reports on the Rumaila oilfield redevelopment project, the first long-term oil contract of the post-Saddam era and Iraq’s biggest treasure estimated to contain 15 per cent of country’s oil reserves.

Transcript of Rebirth of Rumaila

Page 1: Rebirth of Rumaila

REDEFINING REFININGWith Dr Eion Turnbull, Deputy CEO of Bapco

FIELD OF DREAMSKOC’s exploration chief, Khalid Al-Sumaiti, outlines the company’s 2030 vision

BRIGHT SPARKGerald Schotman, CTO of Shell, on the oil giant’s innovation strategy

BAHRAIN’S

OPPORTUNITYMinister of Oil and Gas Affairs HE Dr Abdul-Hussain Ali Mirza on why the future is bright for his country’s energy sector

SPECIAL REPORTSYemen’s energy outlook

Untapped potential in Iraq

www.ngoilgasmena.com • Q2 2010

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PROJECT UPDATE

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Rebirth of RumailaJust to the south of the fertile lands of Al-Qurnah, the meeting point of the Tigris and Euphrates rivers, and 60 km west of Basra in south-eastern Iraq lies a stony desert with a bleak landscape that is decorated only by oases of small shrubs, isolated sand hills and dry river beds. However, underneath this wasteland lies Iraq’s biggest treasure – the supergiant Rumaila fi eld, estimated to contain 15 percent of the country’s oil reserves. Maxim Lyashko reports.

improvement, and for the past two decades Rumaila remained damaged from over-drill-ing and poor reservoir management.

Now all that is about to change aft er BP and its partner China National Petroleum Corporation (CNPC) won the right to develop the fi eld in a historic televised auction in June 2009 and later in November of that year it for-mally signed a 20-year technical service con-tract – the fi rst long-term oilfi eld development contract of the post-Saddam era.

The workhorse of Iraq’s oil industry

It seems that Rumaila is as important to Iraq as it is to BP. Th e British oil major helped to discover the fi eld back in 1953 and gained further information on its structure through a reservoir study contract awarded by the Iraqi Oil Ministry in 2005. Th is early interest by BP is not surprising – Rumalia is among the world’s last remaining pockets of so-called ‘easy oi’, meaning that it does not require expensive ultradeep drilling or pioneering production techniques. Its estimated recoverable reserves of 17.77 billion barrels are larger than the total proven oil reserves of China, Qatar or Algeria. So it is no wonder that BP has agreed to develop Rumaila without getting an ownership stake in the fi eld while also accepting the government’s low remuneration fee of only US$2 per barrel once the production has been raised by 10 per-cent from its current level.

Th e Rumaila fi eld is an 80 km long anti-clinal structure that was found to be trending from south to north and historically divided into two parts. “When Rumaila was discovered it was believed to be a single domal structure

Rumaila’s turbulent history started over half a century ago when it was discovered by Basra Petroleum Co. in 1953. Since then the de-velopment of the fi eld has

been closely linked with Iraq’s transformation into the world’s major oil producer and ex-porter as well as with the country’s infamous war confl icts in the not so distant past. Oil production at Rumaila started just a year aft er its discovery at a rate of 20,000 barrels per day (bpd) and reached its peak of about 1.6 million bpd in 1980, which represented an astonishing 45percent of Iraq’s total output that year. How-ever, the subsequent history of oil extraction at this fi eld had a cyclical nature due to numerous military confl icts starting with the Iran-Iraq War, during which the production from the fi eld was completely halted. Moreover, it was Rumaila that became one of the main reasons for Iraq’s invasion of Kuwait who were accused of using directional drilling technologies to pump oil from underneath the border and al-legedly stealing US$2.4 billion worth of Iraqi crude. Finally, it was on this oilfi eld where the last battle of the Gulf War took place in 1991.

Bearing strategic importance to Iraq’s economy, Rumaila was the fi rst fi eld in the country to restart production aft er the Gulf War; however, subsequent years of UN sanc-tions, post-2003 violence and long-term un-derinvestment in Iraq’s petroleum sector took their toll on the fi eld’s development. Even water injection system projects at Rumaila, which were part of US-directed aid programmes aimed at the reconstruction of Iraqi oil sector in the 1990’s, have not resulted in the expected

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achieved in 1980, but still accounted for almost half of Iraq’s annual oil production. Th e con-sortium led by BP (38 percent) with partners CNPC (37 percent) and State Oil Marketing Organisation, the sales arm of the Iraqi Min-istry of Oil (25 percent), has agreed to nearly triple the Rumaila fi eld’s output to 2.85 million bpd in only six years. Th is would make it the world’s second largest producing oilfi eld aft er Saudi Arabia’s Ghawar and would alone lift

Iraq’s total oil production capacity from about 2.5 million bpd to 5.35 million bpd.

Th e 20-year contract, however, comes with a spending commitment of US$15 billion. Th e fi rst stage is the 33-month remedial pro-gramme involving three steps starting with a halt to any non-optimal operations that Iraqi oil engineers had to revert to in past years, oft en due to the lack of other options; then arresting the production decline; and fi nally achieving a sustainable and improved production rate of 10 percent above the initial rate prevailing at the start of the contract. BP is looking to spend a minimum US$300 million in order to carry out the appraisal programme including acquiring, processing and interpreting 1500 square km of 3D seismic survey over the two

confi ned to the south of extensive marshland to the north,” explains Michael Daly, Group Vice President for Exploration at BP. “Th is area later became South Rumaila as prospecting moved northwards and discovered the North Rumaila continuation in 1961.” Th e total reserves of North Rumaila are estimated at some 31 bil-lion barrels with only just over three billion barrels produced so far. Th is section has three reservoirs in development including the Mish-rif limestone, Upper Zubair sandstone and the heterogeneous Nahr Umr Formation. Mishrif is the biggest reservoir in North Rumaila account-ing for over 70 percent of its reserves. Th e South Rumaila section is thought to have 30 billion barrels, but because of the inclined nature of the formation it has so far produced three times more oil than its northern part. Th ere are four reservoir units that have already been appraised and produced from and which are distributed between the Mishrif and Zubair formations. Th e Zubair reservoirs are the Upper Shale and Upper Sandstone (collectively known as the Main Pay) and Lower Sandstone members. Currently, according to Daly, the volumes are well-described only in the Main Pay and Mish-rif reservoirs. “Other reservoirs still require

signifi cant defi nition before a defi nitive volume can be determined,” he says. “Suffi ce to say the volume is large.” Moreover, there are additional hidden treasures for BP. First, there are discov-ered but undeveloped reservoirs – Nahr Umr, Upper Shale Member, Yamama, Najma, Alan and Mus/Adaiya in North Rumaila and Lower Fars, Nahr Umar, Fourth Pay and Yamama in the South. Second, there are the undiscovered potential reservoirs that the consortium can explore and develop over the course of their 20-year redevelopment project.

Path to recoveryAt the end of 2009, the struggling fi eld

was producing approximately one million bpd, which is far from its potential and the peak

fi elds’ area and preparing the much needed geological and reservoir engineering studies and 3D simulation for the reservoirs. Th e most important objective for BP is achieving an im-proved production target rate, since it will be able to recover its costs and receive US$2 bil-lion worth of oil once this initial incremental production is brought on stream. “Th e current infrastructure in place on the fi eld consists of over 800 wells – over 550 producers and more than 150 injection wells – feeding 10 gathering and degassing centres,” says Daly. “Just over half of the producing wells are fl owing today; but it is the wells that are not fl owing where the short-term oil opportunity lies.”

Since the Rumaila service contract entered into eff ect on December 17, BP hasn’t been wasting time – in January the consortium held the fi rst joint management committee meeting and decided on a US$1.7 billion budget for 2010 with the target to add between 150,000-200,000 bpd by December 2010. On top of that, 10 fi rms (including Halliburton, Schlumberger, Baker Hughes, Weatherford, Iraq Drilling Company as well as companies from China and Turkey) were invited to drill 56 new wells and do work-over projects on 30 others. Currently, the fi eld has 10 rigs (six belonging to Iraq Drilling Com-pany and four to Weatherford and Akkad). BP’s plan is to add fi ve new rigs this year and another 10 in 2011. Th e consortium is also looking to drill 200 additional wells next year to pump output at Rumaila up to 1.5 million bpd. Th is rehabilitation and expansion project is man-aged by the Rumaila Field Operating Organisa-tion (ROO) staff ed mainly by employees from

“Rumaila is clearly a brownfi eld development with a huge amount of kit in the ground and on the surface. Th is fact has important implications for our confi dence in our ability to reach the initial production target”

Excess gas is burned off at the Rumala oil fi eld

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use a number of its proprietary technologies, including its smart fi eld or Field of the Future technology to provide real time management and remote monitoring of wells; Bright Water injection of a polymer to help improve the effi ciency of water fl ooding; and POWERlift ESPs which will allow for downhole repair and replacement. But in addition to refurbishing the production plants and the water injection facilities, another important task BP is facing is to fi rst supply all 12 production units and 10 water injection plants in North and South Rumaila with an internet connection.

BP has a lot of experience of taking on brownfi eld developments, so Daly is confi -dent in achieving ambitious targets set by the contract. However, there are a number of key challenges. “Regionally several large development issues remain such as access to suffi cient water for large water fl ood projects, gas capture and utilisation and suffi cient export ullage for the oil production growth”, he explains. “A number of logistical issues could also impact the pace of development. Th ere will now be 10 developments compet-ing for resources; skilled people, oil fi eld services etc.” Despite these challenges, which are currently being addressed by the con-sortium, Rumaila is fi nally entering the 21st century aft er over 50 years in development. Iraq is currently the world’s eleventh biggest oil producer, but the invitation of foreign oil majors with their cash and expertise and the rehabilitation of its supergiant oilfi elds give it the potential to climb to third place or higher, rivalling Russia and Saudi Arabia. An in-crease in production to just over four million bpd in the next fi ve years will also pour ap-proximately US$1.7 trillion into the country’s battered economy and would fi nance major infrastructure projects across Iraq. Both BP and CNPC see rejuvenation of Rumaila as a key step in the post-war reconstruction of the country, and with such remarkable history this fi eld is without doubt going to play a cru-cial role in Iraq’s future.

Dr Michael C Daly is Group Vice President for Exploration, BP, responsible for the renewal of BP’s oil and gas resource base, which includes accessing new resources, identifying new areas of exploration potential, and leading the company’s exploration drilling programme. He began his career as a fi eld geologist in the Geological Survey of Zambia, later joining BP as a structural geologist in the mid-1980s. Prior to his appointment as the head of exploration, Daly was BP’s President of Middle East and South Asia.

Daly continues: “A full fi eld surveillance pro-gramme will be established on the existing Rumaila well stock. From our earlier work we have more than a year’s work of well workovers already identifi ed, largely involving the addi-tion of electric submersible pumps (ESPs) to improve well deliverability and workovers of the old wells.

Longer term we will enter the enhanced redevelopment phase, which will grow the well stock through a major drilling campaign, eventually deploying 20-25 drilling rigs and a number of workover rigs. Th is early work will focus on the Main Pay reservoir and also start the full fi eld development of the Mishrif. Th e Main Pay will be the main story in the early years; the Mishrif peak will follow and sus-tain the fi eld. Th is will be accompanied by a fi eld-wide waterfl ood campaign to maintain fi eld pressure.” According to Daly, BP will

South Oil Company (fi eld’s original operator) and a small number of technical experts and managers from BP and CNPC. “Th e job BP has now taken on is to work with the South Oil Company and our partners to renew invest-ment in the fi eld and to bring new and innova-tive technology with the singular intent to grow production beyond the previous peak; sustain it for several years; and in doing so increase the expected recovery factor of Rumaila”, explains Daly. “Rumaila is clearly a brownfi eld develop-ment with a huge amount of kit in the ground and on the surface. Th is fact has important implications for our confi dence in our ability to reach the initial production target.”

The BP solutionBP’s development plan starts with a focus

on securing the base production from both the Main Pay and the Mishrif reservoirs.

Work continues at the Rumaila oil fi eld in 2009

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