Engineering and financing to delay giant Iraqi desalination facility

14 February 2011

Water facility needed for injection into southern oilfields

Iraq’s Oil Ministry and its international oil company (IOCs) partners’ plans for a giant seawater processing facility for injection into its southern oil fields are expected to be delayed due to the amount of engineering and financing the project requires.

The planned Common Seawater Supply Facility (CSSF) is intended to process 15 million barrels a day (b/d) of seawater from the Gulf to provide as much as 12 million b/d of treated water to be injected in fields awarded in Iraq’s first and second oil licensing rounds.

US oil major ExxonMobil has been tasked with leading a committee of international oil companies (IOCs), the Oil Ministry and state-owned South Oil Company to study the conceptual design of the project, which is estimated will cost more than $10bn.

Its first technical study was due to be completed in September 2010, after the scheme was approved by the Iraqi Cabinet on 22 September.

“I think it is too early to say it is dead, as it would be difficult to develop the West Qurna and West Qurna II fields without it,” says a source close to the project in Baghdad.

Even if the project goes ahead, the timeline for the development of the scheme is likely to change. “If the engineering and costs are as exorbitant as even a reasonable international observer could imagine, there would need to be some renegotiation and de-working of the developmental timeline and terms in the contracts of the involved fields,” says the source.

All the fields being developed by IOCs will at some point require water injection to increase recovery. The amount of water will vary from field to field meanging the injection project will have to be flexible enough to meet these changing requirements.

The UK’s BP formed the Rumaila Operating Company in July 2010 along with China National Petroleum Corporation (CNPC). It has succeeded in raising production at the field to more than 1.15 million b/d. The partners are targeting a plateau level of 2.85 million b/d by 2017 (MEED 14:7:10).

The Rumaila oilfield currently produces almost as much water as it does oil, allowing its developer to simply reinject it back into the field when necessary. In the long run, all the fields in the south will require water injection to increase recovery at some stage.

Not all the operators are so fortunate. Each field will be set on a different timeline and will have different requirements. The demand for water will also increase rapidly from 2012, once the first phase of development projects commence production.

How Iraq will balance the competing demands of the IOCs and structure the financing is not clear. The IOCs are again expected to pay for the project as the Iraqi cabinet regards the scheme as a “supplementary cost,” says one Baghdad-based source.

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