Statistically, there are few countries which can match Iraq’s petroleum potential: 115 billion barrels of proven reserves, 100 billion barrels of undiscovered potential, and some 535 known structures, only 88 of which have been drilled. Yet Iraq’s production is only around 2.4 million barrels per day, much less than that of its peers. An analysis of the potential suggests that production could double or triple in the next five to seven years, just based on the current reserve base (Figure 1 and 2).

In addition, a large exploration potential exists with whole provinces such as the Western Desert and Northern Zagros relatively unexplored. The Western Desert has sparse seismic coverage, only one gas condensate discovery – Akkas – and only a handful of wells. Recent work in the region suggests large Lower Paleozoic potential. Farther east, potential abounds both above and below the Gotnia Salt. Jurassic reservoirs in Kuwait may also extend into Iraq.

Companies have seized upon Iraq’s potential and have mapped out their entry strategies. Independents have chosen to work in the Kurdistan portion of northern Iraq, where prospects are still in the super-giant class but smaller and logistically less challenging than those in central and southern Iraq. Super majors are focusing on the producing super-giant fields, such as Qurna, Kirkurk, and Rumalia, opting to work on field growth. And some others, such as Shell and Ivanhoe, are carving out niches in gas and heavy oil.

The entry tactics have been different for the three types of strategies as well. In the Kurdistan portion of Iraq, operators secured rights via direct negotiations with the KRG local government. Some 20 companies now hold rights in the KRG portion of Iraq. In the KRG, companies have been signing PSCs whose terms generally provide the operators with a 10- 15 % production share.

In the south and central areas, companies began with study groups and technical study / assistance agreements which lasted one to three years. These are now concluded. Despite the expectation that these study groups would result in signed joint-venture agreements, the Iraqi government has chosen to go to a quasiopen bidding system with companies qualifying based on size. Necessary qualifications start at greater than 500,000 barrels of oil per day down to 100,000 barrels of oil per day for round one and dropping some for round two. This will ensure that the world’s super majors—NOC and IOC, that worked on the technical studies—still have key roles, but not necessarily on the project they originally worked. Figure 3 shows the locations of round one licensing blocks.

Figure 1. Remaining Gas Reserves versus Original Recoverable Estimates

Figure 2. Remaining Oil Reserves versus Original Recoverable Estimates

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In parallel and in the background of the technical studies are several legacy contracts with companies such as CNPC, Lukoil, Total, which were re-negotiated, along with gas, heavy oil, and downstream projects.

Unlocking those reserves will require overcoming a long laundry list of above-ground issues and challenges which vary from region to region. In the KRG portion of Iraq, at the top of the list is the ability to export and contract validity. There is still a strong debate between the central government and KRG over the region’s authority to prosecute and design contracts. In the south and central portions of Iraq, the main issues are those of security and the types of contracts. For both regions, issues of access to manpower, equipment, and infrastructure round out the top challenges.

Utilizing a panel format, this dinner meeting will address the remaining potential in the known Iraqi fields and the exploration potential. The discussion will provide some insights into how some operators and potential operators are dealing with above-ground risks. The panel will also take questions and comments from the audience.

Figure 3. Location of Round One 2008 Licensing Blocks, Iraq

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