Two firms bid for Iraq water supply design project

16 March 2014

Common Seawater Supply Facility critical to country’s long-term oil production plans

Iraq’s state-owned South Oil Company (SOC) has received only two bids for a deal to provide front-end engineering and design (feed) services for a critical water treatment and supply facility, one of the country’s most important upstream oil infrastructure projects.

SOC, a subsidiary of the Oil Ministry invited five international engineering firms to bid for the design of the $10bn Common Seawater Supply Facility (CSSF), including the UK’s Amec and the US’ Fluor Corporation and KBR, but only received two responses, according to sources close to the scheme.

The US’ Parsons Corporation and Austria’s ILF Consulting Engineers both submitted technical proposals in February and are set to provide commercial bids for the design deal in April before a feed contractor is selected.

The CSSF project covers the construction of a giant seawater treatment plant and pipelines to carry the water to some of Iraq’s biggest oil fields in the south of the country. It is critical to Baghdad’s hopes of expanding its crude production capacity, allowing oil firms to inject water into deeper reservoirs to support oil production.

The CSSF scheme has suffered several setbacks since it was first conceived. Originally led by US oil major ExxonMobil, the project is now being managed by US engineering consultant CH2M Hill, which was appointed in late 2012.

According to the firm’s project milestones, the feed contracts were expected to be awarded in the third quarter of 2013 and design work completed by September 2014. Engineering, procurement and construction (EPC) contracts are due to be signed in early 2015.

Construction is planned over two phases, with commissioning planned for the middle of 2017, much later than originally planned.  Phase one will provide 6.7 million barrels a day (b/d) of water for the five fields of Zubair, Rumaila, West Qurna-1, West Qurna-2 and Majnoon.

Further phases will increase supplies to these fields, as well as to the Gharraf, Halfaya and Missan oil fields. Depending on Iraq’s targeted crude production levels, the total demand for water could reach 12.5 million b/d.

Delays to the tendering and construction process could have a major impact on Iraq’s oil production plans.

To meet oil production levels of 9 million b/d, the Paris-based International Energy Agency (IEA) estimates Iraq’s net water injection requirements will increase from 1.6 million b/d in 2011 to more than 12 million b/d in 2035. This is based on an average of 1.5 barrels of water that must be injected into the country’s oil reservoirs to replace each barrel of oil produced.

The IEA warned in its 2012 Iraq Energy Outlook that if water injection needs were not met, reservoir pressure in unsupported fields would fall causing well flow rates to decline and making it more difficult to raise oil output. It could also increase gas production, which would mean greater gas flaring and potential reservoir damage, reducing the total volume of oil that can ultimately be recovered.

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