Iraq plans oil and gas pipeline expansion

17 April 2011

Oil Ministry to launch estimated $50bn rehabilitation programme

Iraq’s Oil Ministry is preparing to launch an estimated $50bn programme to rehabilitate its oil and gas export pipelines, a vital part of integrating Iraq’s oil fields back into global markets.

The programme will be tendered in three phases, says a source close to the ministry.

The engineering consultancy contract for the first phase of the development is expected to be signed at the end of April or early May. The build, operate and transfer (BOT) contracts will be tendered in 2012.

The first two phases will be funded from Iraq’s oil revenues, while phase three will require foreign investment.

Phase one will include a 1.75 million barrel-a-day (b/d) pipeline from Basra in the south of Iraq to Haditha, in the western Anbar governorate, about 240 kilometres northwest of Baghdad. The pipeline will then split, with one line going westwards to the Syrian border and the other joining the northern export pipeline from Kirkuk to Ceyhan in Turkey.

It will also include a natural gas pipeline to supply the pumping stations and a storage terminal and tanks in Basra, Haditha and Baiji, 200km from Baghdad.

The Oil Ministry also plans to rehabilitate the 1.6 million b/d northern Kirkuk-Ceyhan pipeline replacing the corroded sections of the 30-inch line. Output from the twin pipeline has effectively been halved since the US-led invasion in 2003 when the IT-2 pumping station on the second line was disabled. The pumping station located south of Mosul will also need to be replaced (MEED 4:3:11).

Baghdad is also considering a gas export pipeline from Basra to North Baghdad. “This could be expanded for exports to Turkey and Syria later, possibly as part of the Nabucco pipeline”, says the source. The3,000-kilometre Nabucco pipeline will carry gas from from Turkey to Western Europe and is planned to start operations in 2014.

“The sizes of the pipelines will vary as the engineering has not been done yet,” says the source, but overall, more than 7,000km of pipeline will be required.

Longer term plans for pipeline revamp are currently yet to be determined and the timeline for the projects will depend on the success of the first phase and the political situation in the region.

Phase two includes a 1.5 million b/d heavy crude oil pipeline from Basra to North Baghdad and then diverted to the Syrian port of Tartus for export into the Mediterranean. The ministry is also considering a gas line from Basra to Kirkuk running along Iraq’s eastern provinces. The plans also call for at least five new oil depots, with two at Kirkuk and Basra, and one at Haditha.  

There is also the possibility of a trans-Iraq liquid petroleum gas (LPG) pipeline, says the source. “In the next few years, as oil production from the licensed fields increases, Iraq will face a problem of excess LPG, which it cannot export”.

How quickly LPG supply outstrips export capacity at the Khor al-Zubair oil terminal near Basra will depend on how successful international oil companies are in raising oil production. Rehabilitating the Khor al-Zubair LPG terminal is the responsibility of UK-Dutch oil major Shell under a controversial agreement with the Oil Ministry in 2008 for the capture and utilisation of flared gas in the south of Iraq.

“It is very important, but the situation is very vague. The Shell deal has not been approved by the cabinet yet and looks likely to be challenged by the new oil and gas committee in parliament,” says the source.

The initial agreement became an embarrassment for the Oil Ministry due to the way it was awarded and the extent of the concession available to Shell on gas produced across the south of the country. Shell’s plans to export surplus gas, while Iraq suffers shortages of electricity have been a source of criticism.

The Oil Ministry reports that approximately 60 per cent of Iraq’s associated natural gas production is flared due to a lack of sufficient infrastructure to use it. Estimates of how much gas is lost to flaring range are up to 700 million cubic feet a day (cf/d), equivalent to 300,000 bottles of LPG a day. This is more than $1bn in lost revenues to the government each year and the figure is set to increase as Iraq’s oil production rises.

The final phase of the oil and gas pipeline expansion involves the construction of oil product pipelines from Iraq’s current and four planned refineries to depots across the country.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.