Perhaps more than any other single factor, the Common Seawater Supply Project (CSSP) is critical in enabling Iraq to dramatically increase its crude oil production. It was delayed for over a decade, as ExxonMobil and the China National Petroleum Corporation (CNPC) battled it out for control over the project. Finally, the U.S. firm pulled out and the Chinese company’s progress ground to a halt, leaving the way clear for the project to become part of the US$27 billion four-pronged Gas Growth Integrated Project (GGIP) deal being worked by France’s TotalEnergies. According to local Iraqi news sources close to the project, the first phase of the CSSP is now expected to be operational in 2028. However, given the history of such projects in Iraq, many remain sceptical that it will progress as planned.
On the face of it, there is no good reason why Iraq cannot become one of the world’s top three producers, even taking the number two spot ahead of Russia and then Saudi Arabia, but behind the U.S. Officially, according to the Energy Information Administration, Iraq holds a very conservatively-estimated 145 billion barrels of proved crude oil reserves (nearly 18 percent of the Middle East’s total, and the fifth biggest on the planet). Unofficially, it is extremely likely that it holds much more oil than this, as analysed in full in my new book on the new global oil market order. In October 2010, Iraq’s Oil Ministry increased its own official figure for the country’s proven reserves but at the same time stated that Iraq’s undiscovered resources amounted to around 215 billion barrels. This was also a figure that had been arrived at in a 1997 detailed study by respected independent oil and gas firm, Petrolog. Even this figure, though, did not include the parts of northern Iraq in the semi-autonomous region of Kurdistan. As separately highlighted by the International Energy Agency (IEA), most of these had been drilled during a period before the 1970s began when technical limits and low oil prices gave a narrower definition of what constituted a commercially successful well than would be the case now. Overall, the IEA underlined that the level of ultimately recoverable resources across all of Iraq (including the Kurdistan region) at around 246 billion barrels (crude and natural gas liquids). Related: Consumers Sue U.S. Shale Alleging Collusion to Boost Oil Prices
Given the true scale of Iraq’s oil reserves – and the fact that the average lifting cost per barrel of oil in the country is US$1-2 pb (the lowest in the world, along with Iran and Saudi Arabia) – what sort of oil output could reasonably be expected? Back in 2013, the Integrated National Energy Strategy (INES) was produced, and this analysed in detail three realistic forward oil production profiles for Iraq and what each would involve. As also detailed in my new book, the INES’ best-case scenario was for crude oil production capacity to increase to 13 million bpd (at that point, by 2017), peaking at around that level until 2023, and finally gradually declining to around 10 million bpd for a long-sustained period thereafter. The mid-range production scenario was for Iraq to reach 9 million bpd (at that point, by 2020), and the worst-case INES scenario was for production to reach 6 million bpd (at that point, by 2020). These numbers compare to current Iraqi production of around 3.9 million barrels per day (bpd), although this reflects voluntary cuts in line with OPEC+ objectives. Average crude oil production in 2023 was 4.6 million bpd – almost the same as in 2022.
According to the local sources, the first phase of the CSSP will involve taking five million bpd of seawater from the Persian Gulf, which will then be transported via pipelines to oil production facilities in the provinces of Basra, Missan, and DhiQar for the purpose of maintaining pressure in their key oil reservoirs to optimise the longevity and output of their fields. The original plan was that the CSSP start with 6 million bpd and increase the capacity from there. Both the longstanding stalwart fields of Kirkuk and Rumaila – the former beginning production in the 1920s and the latter in the 1950s, with both having produced around 80 percent of Iraq’s cumulative oil production – require major ongoing water injection. According to industry figures, the reservoir pressure at the former dropped significantly after output of only around 5 percent of the oil in place (OIP). Rumaila, in the meantime, produced more than 25 percent of its OIP before water injection was required (as it main formation connects to a large source of groundwater). Although the water requirements for most of Iraq’s oilfields fall between these two cases, the needs for oilfield injection are highest in southern Iraq, in which water resources are also the least available. To reach and then sustain the higher levels of the INES’s oil production profiles, Iraq will have total water injection needs equating to around 2 percent of the combined average flows of the Tigris and Euphrates rivers or 6 percent of their combined flow during the low season, according to the IEA. These amounts might not look too onerous, but they will have to be drawn out of the common supply that also needs to keep satisfying the needs of other big users.
Nonetheless, ExxonMobil had the know-how, technology, and money to successfully complete all elements of the CSSP, but ran into the familiar problem of corruption in Iraq’s oil sector. It seems clear from the repeated delays to the final ratification of TotalEnergies’ four-pronged deal – including the CSSP – that Iraq tried similar tactics on the French firm. At one stage, Baghdad was even in the process of trying to re-establish the omni-toxic Iraqi National Oil Company (INOC), an organisation widely regarded within the oil industry as one of the most corrupt organisations ever created. However, it quickly became clear that one does not get to become a senior figure in France’s leading oil and gas company by being as stupid as seems to be the minimum requirement to secure some positions in Iraq’s Oil Ministry, with TotalEnergies refusing to partner with INOC ‘due to the lack of clarity on the legal status of the company’. In layman’s terms, the French oil and gas behemoth did not trust INOC as far as it could throw it. There were further subsequent shenanigans from Iraq aimed at increasing the possibilities for personal enrichment of some key government people involved – the main one being an increase in the government’s stake in the projects to varying degrees – but all were rebuffed by the French firm. As it is, the Iraq government (through the Basrah Oil Company) holds a 30 percent stake in the megadeal. TotalEnergies has 45 percent of it, and QatarEnergy holds the remaining 25 percent stake.
So will the CSSP now progress as planned? For seasoned Iraq-watchers, extreme pessimism has usually been the right call on such projects. Even a senior official at the state-run Basra Oil Company quoted by a local news source said, “If we actually start work on the ground, with an accelerated plan during 2024, I expect that the fields will begin receiving water from the seawater project in 2027.” It is indeed a big ‘if’. A comparison on progress was given by the IEA back in 2012 when the CSSP project had already been under discussion for some considerable time. Specifically, Saudi Aramco’s Qurayyah Seawater Plant Expansion – which involved the 2 million bpd expansion of an existing facility - took nearly four years from the awarding of the front-end engineering, procurement and design contract (in May 2005) to the time that water first began to flow in early 2009. From when the CSSP was first officially proposed by Iraq’s state-owned South Oil Company in 2011, 13 years have passed so far, and nothing meaningful has been achieved yet.
By Simon Watkins for Oilprice.com
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