Baker Hughes is to develop a 100mmcf per day processing plant to reduce the flaring of gas in Iraq
Baghdad made progress in July on an intensifying drive to reduce the flagrant quantities of associated gas wastefully flared from the country’s giant southern oilfields. US engineering giant GE, a well-established government partner, has been enlisted on a project to monetise the resource in Dhi Qar Province.
The deal was accompanied by a series of professions of intent to develop the sector further.
The nascent Iraqi gas industry passed a symbolic milestone last year with the first exports, but the federal government was also forced last month to commence imports of the natural gas required for domestic purposes from neighbouring Iran. Meanwhile, a survey by the international body leading the drive to reduce flaring confirmed that the volumes being expensively wasted remained among the world’s highest.
A flare for projects In July, the federal Ministry of Oil (MOO) signed a contract with Baker Hughes – a GE company since a merger with the former GE Oil & Gas division earlier this year – to carry out a two-phase project to recover hitherto flared gas from the Gharraf and Nasiriyah oilfields in the southern Dhi Qar province.
The first, fast-track scheme covers the installation of a modular gas-processing plant located at Nasiriyah – some 200 km north-west of Basra – to produce around 100 mmcf (2.8 mcm) per day by dehydrating and compressing associated gas from the two fields.
The plant will subsequently be expanded into a complete natural gas liquids (NGL) plant – recovering around 200 mmcf (5.7 mcm) per day of dry gas, LPG and condensate.
The dry gas will be used chiefly in domestic power generation, while the LPG and condensate will be deployed first to meet local demand for cooking fuel – with the remainder sent for export.
GE is heavily involved in Iraq’s electricity sector, supplying equipment for around 60% of the country’s generation capacity. The firm was also involved well before the Baker Hughes merger in activities further upstream. In 2013, the US company established a base in the north of the supergiant Rumaila field – source of more than a third of federal production of 4 million bpd – to supply equipment and services to the companies involved in developing the asset.
GE supplied five gas turbines for the 235-MW North Rumaila power plant, due to be commissioned later this year and running on associated gas captured from the field.
Stunted development The estimated 1.3 billion barrel Gharraf field, located around 85 km north of Nasiriyah City, is operated by Malaysia’s Petronas, which holds 45%. It is partnered by Japan Petroleum Exploration (JAPEX) with 30% and state-owned North Oil Co. (NOC). The licence was awarded during Baghdad’s second international licensing round in late 2009.
Production belatedly commenced at 100,000 bpd in 2014 but the tendering process initiated the following year to more than double output in pursuit of a plateau target of 230,000 bpd appeared to stall in the wake of the government’s financial and security crises erupting that year.
South Korea’s STX Heavy Industries won a US$99.5 million, two-year contract in January 2014 to install a 46 mmcf (1.3 mcm) per day gas treatment unit at the field, processing gas from the Mishrif oil train for supply to a nearby power plant. Current production at Nasiriyah – which remains operated by the government – is believed to stand at around 70,000 bpd.
The primary immediate aim of the gas development efforts is to meet the domestic shortfall of sales gas – and the accompanying popular anger at the serious power and fuel shortages thereby created. Huge and growing volumes continued to be flared while the government was forced to commence long-awaited imports from Iran last month.
Supplies from its neighbour started at 7 mcm per day and are due to rise to 35 mcm per day at an undetermined date in the future. However, the time taken for the first phase of the long-standing import agreement to be realised has created some doubt around the latter, as Iraq accelerates progress on developing indigenous resources.
Gas rises The government fulfilled a decades-old goal of exporting gas last year by recording the first overseas shipments of condensate and LPG in March and July respectively.
Oil Minister Jabbar al-Luaibi marked the opening of a third loading dock for liquid gas at Umm Qasr port in late July by declaring that gas production was on track to reach 1.3 bcf (37 mcm) per day by the end of the year, with condensate and LPG exports due to rise commensurately.
A press release issued by the ministry shortly afterwards noted that condensate and LPG exports during the first six months of the year had totalled around 356,000 cubic metres (2.2 million barrels) and 59,370 tonnes respectively. Baghdad’s development of the gas sector has an advantage over that of the country’s lifeblood oil industry in garnering direct foreign donor support in view of the huge environmental benefits.
Aware of the burgeoning financial losses of flaring and under pressure from potential international funders, the government signed up in 2011 to the World Bank-led Global Gas Flaring Reduction Partnership (GGFRP). The commitment was followed two years later by the creation of Basrah Gas Co. (BGC) to implement the estimated US$17.5 billion so-called South Gas Utilisation Project (SGUP), designed to develop the infrastructure for the treatment and distribution of associated gas from the giant Rumaila, West Qurna 1 and Zubair fields in Basra Province.
The government conducted a gas-focused third international upstream bid round in late 2010 – apportioning the Siba field in the south, Akkas in the west and Mansouriya near Baghdad in the centre. Development of the latter two has been delayed by security problems, while Siba, operated by privately owned Kuwait Energy Co. (KEC), is due on stream producing 100 mmcf (2.8 mcm) per day by the end of next year.
The fourth auction, conducted in 2012, included a number of gas fields but received a disappointing response attributed in part to the country’s underdeveloped gas infrastructure – which the SGUP is designed to address. According to the GGFRP, the five largest oilfields in the oil-rich Basra province account for around 65% of the country’s current flaring. BGC is a joint venture comprising state-owned South Gas Co., Royal Dutch Shell and Japan’s Mitsubishi.
Financial assistance for such efforts has been provided through a Development Policy Financing agreement with the World Bank, first signed in late 2015 and renewed in December – in each case entailing a concessionary loan of US$1.2 billion to support projects and policies geared towards energy efficiency among other goals. The GGFRP’s annual report, published on July 10, showed the quantity of gas flared by Iraq in 2016 rising against global trends by 1 bcm to just under 17 bcm – the second highest in the world after Russia and, unlike the latter, with a ratio to oil production well above the world average.
In an announcement to celebrate Baghdad committing to the international body’s initiative to eliminate routine flaring entirely by 2030, the partnership’s sponsors enumerated the extent of the current wastage.
Annual economic losses to Baghdad were estimated at US$2.5 billion, while the flared gas was said to be sufficient to meet the bulk of the country’s requirements for gas-based power generation and to support incremental capacity of around 8,500 MW.
The ‘zero-flaring’ agreement also commits the government not to flare gas at new field developments – and the terms of an abortive licensing round launched late last year included a requirement to utilise associated gas from any development.