December 9, 2010Interview: Thamir Ghadhban
Few oil men have been so central to Iraq’s oil sector as Thamir Ghadhban. Not only did he serve as oil minister immediately after the fall of Saddam Hussein’s regime, but he was also one of three authors of the draft oil law, and he now advises Prime Minister Nouri al-Maliki on oil and economic policy.
On the sidelines of the recent annual CWC Iraqi Petroleum conference in London, Ghadhban sat down with a handful of oil reporters and discussed his oil production assessment – lower than the Oil Ministry’s – and its effect on IOC contracts, which are paid according to production increases. He also addressed rumors that Zubair’s recent output hike may not be according to the contract.
Q: The initialing of the Akkas gas field contract was delayed. What’s going on with it now.
Thamir Ghadhban: As far as I know there are two issues. One is an internal Iraqi issue – the objection of the governing council of Anbar. I believe they have a legitimate point. The Ministry of Oil should have consulted with them. According to the constitution, there is such a role for the governing council of governorates containing oil and gas.
On the other hand, I don’t take what was on the news seriously. None of them in the governing councils have actually claimed that they have the powers to contract or develop such field by themselves. They wanted their point of view to be heard about the development of the field and to make sure that such development will provide enough opportunity for their people and their sons – the sons of Anbar – to work.
Therefore, when it comes to the points of difference I don’t think it is difficult to overcome it. The Ministry of Oil could sit with them, invite them, exactly in the same manner that it did with Basra, Amara and Kut when they developed the fields in accordance with the first and second bid rounds, and also with Ahdab.
Also, of course, the governing council of any governorate has no constitutional right to do, or unilateral right of decisions, to develop oil fields or sign contracts. It is the authority and the powers of the Ministry of Oil. But the Ministry of Oil should really have them on board.
The second (issue with Akkas) is that there was talk about whether, during the first stage of development, to transport the raw gas to the adjacent processing facilities in Syria, which has ample surplus capacity. This is not new: even during the former regime there was such technical economic idea that could be utilized. (But) the governing council did not know this background. They did not know the merits. They did not know that this would not really affect adversely on the number of opportunities for work. So the company and the ministry are talking about this possibility, whether it would be included in the contract or not. This is a matter of details.
Finally, taking what I said as far as the relationship and position of the governorate council and the Ministry of Oil, and the contractor, I don’t think they have insurmountable difficulties to overcome. We can solve them in the coming weeks. I expect a contract to be initialed soon.
Q: Wouldn’t taking the gas to Syria mean it would be effectively marked for export?
TG: No, not for export. Now nobody can really talk about exports seriously. The number one priority is to satisfy the domestic need. It’s huge. It will be insane to export gas at the time we need gas for power generation. It was supposed to be a temporary measure – process it, bring it back.
Q: You talked about 8 million bpd production capacity at the same time the Iraqi government has talked about 12 million bpd. Is this a new target or your own opinion?
TG: There are a number of independent and reputable experts who say when we take all the factors put together – logistics, time required to do this and that, OPEC membership, world’s supply and demand – such development cannot really be just a simple mathematical addition of contractual targets. We have to take all these factors that will definitely shape the trend of capacity development.
And I did not talk about actual production, just capacity. If we develop a capacity say to 12 million bpd and at the end of the day our production is based on fundamental demands … that means we have paid so much for idle capacity. I don’t think we will reach 12 million. This is also governed by our concern that to maximize revenue. It could be feasible if the government decides that we must get 12 million bpd. It is feasible, but is it in the best interest of Iraq? This is doubtful.
Iraq at present day is not really after market share like what the Saudis did and what they are prepared to do. We will not fight for a market share at any price. We said that we want to maximize revenue and we want fair price of oil to us – the producers – and to the consumers and therefore we will not be willing to see a price collapse.
Q: So wouldn’t you have to renegotiate with the companies?
TG: I don’t think we have to negotiate right now. First of all, none of them have met their 10 percent target. Eni has done some debottlenecking (at Zubair oil field), reducing pressure here, re-perforating there; it is not really sustainable – they have some work to do. Let us see that they are going to reach the 10 percent, let us see production from the green fields, for example get Halfaya and Garraf and Badra flowing. So there is lots of work to be done and, I’m not saying a long time, but a number of years, and let us see their performance, our performance, and our relationship working together.
Q: You mention Zubair and the increased production. Some engineers there say they have reached 251,000 bpd already but some say that it may turn out to be produced in a way that’s a detriment to the field and would not count toward the 10 percent.
TG: I’m not sure about the authenticity of this. We’ve done it before. In 1972-73 the Basra Petroleum Company, when they wanted to increase production without much commitment of investment, what they did was reexamined the wells. So, a strong well, limited by the flow line – they doubled the flow lines. Or they removed a smaller diameter pipeline and added a larger diameter pipeline. They re-perforated the wells. They shortened the tubing. Removed the chokes and put better well heads and so on. Such type of measures decreases the backpressure on wells and allowed wells to flow.
What Eni consortia did, that’s what they did. As an example: two wells tied together to one pipeline, we call it a Y-piece – like the “y” letter – so they separated the two wells and let them flow separately so there’s an increase in production. The second point is that they lowered down the pressure of the second stage of the degassing station and therefore wells started to flow, or at higher flow.
Of course it is our right and our duty in the Ministry of Oil to examine and assess the effect of such measures. But I don’t see any problem in removing bottlenecks and increasing production. But I would say such types of measures are not really the true development plan. They are short terms. But definitely drilling is required, water injection is required, increasing the capacity of separation, handling water production, is required. So I don’t see a problem unless proved to be detrimental to reservoirs.
Q: That’s the concern, though.
TG: They will look at and see. If it is detrimental (the ministry) will stop them. But this is only for reservoir specialists who can decide it, not lay men or, with all respect, journalists.
Q: What’s happening with Rumaila? It’s not even at the 10 percent.
TG: BP faced the decline issue, and they started work. They deployed drilling rigs and whatever services, plus workovers. I am now aware that they are back to the base production. We expect in the coming months they will add. Their efforts, drilling efforts, work-over efforts, re-perforation and so on, and running pumps – we expect that in the coming months, the production rate from Rumaila fields will be above the base production.
Q: Next year what do you think Iraq’s average output will be?
TG: We expect some increase of some 300,000 bpd on top of current production.
Q: What about in 2012?
TG: We think there will be an increase in production by 750,000 to 1 million bpd. We have a target. In the next four years we want to add at least 2 million bpd, in the new government. So 2.5 million bpd (of current production) plus 2 million bpd (of added production), that’s 4.5 million bpd. And there will be production from KRG on top of that. Perhaps between 250,000 to 400,000 bpd, perhaps even half a million. So between 4.5 and 5 million bpd, I hope, by the end of the term of this government.
http://www.iraqenergy.org/library/interviews.php
Few oil men have been so central to Iraq’s oil sector as Thamir Ghadhban. Not only did he serve as oil minister immediately after the fall of Saddam Hussein’s regime, but he was also one of three authors of the draft oil law, and he now advises Prime Minister Nouri al-Maliki on oil and economic policy.
On the sidelines of the recent annual CWC Iraqi Petroleum conference in London, Ghadhban sat down with a handful of oil reporters and discussed his oil production assessment – lower than the Oil Ministry’s – and its effect on IOC contracts, which are paid according to production increases. He also addressed rumors that Zubair’s recent output hike may not be according to the contract.
Q: The initialing of the Akkas gas field contract was delayed. What’s going on with it now.
Thamir Ghadhban: As far as I know there are two issues. One is an internal Iraqi issue – the objection of the governing council of Anbar. I believe they have a legitimate point. The Ministry of Oil should have consulted with them. According to the constitution, there is such a role for the governing council of governorates containing oil and gas.
On the other hand, I don’t take what was on the news seriously. None of them in the governing councils have actually claimed that they have the powers to contract or develop such field by themselves. They wanted their point of view to be heard about the development of the field and to make sure that such development will provide enough opportunity for their people and their sons – the sons of Anbar – to work.
Therefore, when it comes to the points of difference I don’t think it is difficult to overcome it. The Ministry of Oil could sit with them, invite them, exactly in the same manner that it did with Basra, Amara and Kut when they developed the fields in accordance with the first and second bid rounds, and also with Ahdab.
Also, of course, the governing council of any governorate has no constitutional right to do, or unilateral right of decisions, to develop oil fields or sign contracts. It is the authority and the powers of the Ministry of Oil. But the Ministry of Oil should really have them on board.
The second (issue with Akkas) is that there was talk about whether, during the first stage of development, to transport the raw gas to the adjacent processing facilities in Syria, which has ample surplus capacity. This is not new: even during the former regime there was such technical economic idea that could be utilized. (But) the governing council did not know this background. They did not know the merits. They did not know that this would not really affect adversely on the number of opportunities for work. So the company and the ministry are talking about this possibility, whether it would be included in the contract or not. This is a matter of details.
Finally, taking what I said as far as the relationship and position of the governorate council and the Ministry of Oil, and the contractor, I don’t think they have insurmountable difficulties to overcome. We can solve them in the coming weeks. I expect a contract to be initialed soon.
Q: Wouldn’t taking the gas to Syria mean it would be effectively marked for export?
TG: No, not for export. Now nobody can really talk about exports seriously. The number one priority is to satisfy the domestic need. It’s huge. It will be insane to export gas at the time we need gas for power generation. It was supposed to be a temporary measure – process it, bring it back.
Q: You talked about 8 million bpd production capacity at the same time the Iraqi government has talked about 12 million bpd. Is this a new target or your own opinion?
TG: There are a number of independent and reputable experts who say when we take all the factors put together – logistics, time required to do this and that, OPEC membership, world’s supply and demand – such development cannot really be just a simple mathematical addition of contractual targets. We have to take all these factors that will definitely shape the trend of capacity development.
And I did not talk about actual production, just capacity. If we develop a capacity say to 12 million bpd and at the end of the day our production is based on fundamental demands … that means we have paid so much for idle capacity. I don’t think we will reach 12 million. This is also governed by our concern that to maximize revenue. It could be feasible if the government decides that we must get 12 million bpd. It is feasible, but is it in the best interest of Iraq? This is doubtful.
Iraq at present day is not really after market share like what the Saudis did and what they are prepared to do. We will not fight for a market share at any price. We said that we want to maximize revenue and we want fair price of oil to us – the producers – and to the consumers and therefore we will not be willing to see a price collapse.
Q: So wouldn’t you have to renegotiate with the companies?
TG: I don’t think we have to negotiate right now. First of all, none of them have met their 10 percent target. Eni has done some debottlenecking (at Zubair oil field), reducing pressure here, re-perforating there; it is not really sustainable – they have some work to do. Let us see that they are going to reach the 10 percent, let us see production from the green fields, for example get Halfaya and Garraf and Badra flowing. So there is lots of work to be done and, I’m not saying a long time, but a number of years, and let us see their performance, our performance, and our relationship working together.
Q: You mention Zubair and the increased production. Some engineers there say they have reached 251,000 bpd already but some say that it may turn out to be produced in a way that’s a detriment to the field and would not count toward the 10 percent.
TG: I’m not sure about the authenticity of this. We’ve done it before. In 1972-73 the Basra Petroleum Company, when they wanted to increase production without much commitment of investment, what they did was reexamined the wells. So, a strong well, limited by the flow line – they doubled the flow lines. Or they removed a smaller diameter pipeline and added a larger diameter pipeline. They re-perforated the wells. They shortened the tubing. Removed the chokes and put better well heads and so on. Such type of measures decreases the backpressure on wells and allowed wells to flow.
What Eni consortia did, that’s what they did. As an example: two wells tied together to one pipeline, we call it a Y-piece – like the “y” letter – so they separated the two wells and let them flow separately so there’s an increase in production. The second point is that they lowered down the pressure of the second stage of the degassing station and therefore wells started to flow, or at higher flow.
Of course it is our right and our duty in the Ministry of Oil to examine and assess the effect of such measures. But I don’t see any problem in removing bottlenecks and increasing production. But I would say such types of measures are not really the true development plan. They are short terms. But definitely drilling is required, water injection is required, increasing the capacity of separation, handling water production, is required. So I don’t see a problem unless proved to be detrimental to reservoirs.
Q: That’s the concern, though.
TG: They will look at and see. If it is detrimental (the ministry) will stop them. But this is only for reservoir specialists who can decide it, not lay men or, with all respect, journalists.
Q: What’s happening with Rumaila? It’s not even at the 10 percent.
TG: BP faced the decline issue, and they started work. They deployed drilling rigs and whatever services, plus workovers. I am now aware that they are back to the base production. We expect in the coming months they will add. Their efforts, drilling efforts, work-over efforts, re-perforation and so on, and running pumps – we expect that in the coming months, the production rate from Rumaila fields will be above the base production.
Q: Next year what do you think Iraq’s average output will be?
TG: We expect some increase of some 300,000 bpd on top of current production.
Q: What about in 2012?
TG: We think there will be an increase in production by 750,000 to 1 million bpd. We have a target. In the next four years we want to add at least 2 million bpd, in the new government. So 2.5 million bpd (of current production) plus 2 million bpd (of added production), that’s 4.5 million bpd. And there will be production from KRG on top of that. Perhaps between 250,000 to 400,000 bpd, perhaps even half a million. So between 4.5 and 5 million bpd, I hope, by the end of the term of this government.
http://www.iraqenergy.org/library/interviews.php
