Iraq and fuel hope for sufficiency and ambition to export

Hashem Al , Husseini

Introduction

Iraq is one of the first countries in which hydrocarbon resources (oil and gas) were discovered in commercial quantities, as in 1927 the first flow of oil from the BabaKarak well in  the Kirkuk field, which is one of the giant fields in northern Iraq and is still continuing production until now, nearly a century.

And then rolled discoveries of other fields in the north and south of Iraq to put it at the forefront of the oil countries, where its oil reserves amounted to more than 145 billion barrels, occupying the fourth place in the world  and gas 131 trillion cubic feet to come in the myrrhk g 1  1 globally, despite that, Iraq has suffered from crises and wars that squandered this wealth andlost the ability to benefit fromit. In achieving self-sufficiency and meeting its local need for fuel due to the lack of completion of infrastructure associated with the oil  industry or in some wars the destruction of those facilities, as happened in the first and second Gulf wars, and this matter made Iraq far behind the sight of countries, it is surprising that Iraq, the second largest exporter in OPEC, imports oil derivatives and gas fuel with billions of dollars annually due to the lack of infrastructure and manufacturing facilities   Or with the obsolescence of that facility thathas passed more than twice its operational life

Iraq also lacks associated gas investment projects, as Iraq is the second largest country to burn  this wealth after Russia and the only country in the world to burn gas in its oil fields and import gas to meet its domestic need of using it as fuel for electric power plants.

The development of the Iraqi oil industry

The oil industry is divided into two main parts: the extractive industry and the manufacturing industry, and the extractive industry is concerned with all operations and activities aimed at extracting oil from oil reservoirs, and the manufacturing industry is  the one in which  oil is processed and converted from a raw material  to materials and oil derivatives that are used in other industries, and in turn, the manufacturing industry is divided into several sections, including refining, refining, petrochemical industries and others.  

The Iraqi extractive industry witnessed boom cycles followed by periods of decline and decline, and these periods have their causes, they are mainly related either to wars, as we mentioned earlier, or to the state of the global market, where it went through three cycles of progress and decline from 1973-2017, as  the first collapse occurred in 1980 after oil production reached a record 3.75 million barrels, and then collapsed to nearly 500 thousand barrels due to the Iran-Iraq war and after the recovery of production and the restoration of quantities, where it reached nearly The 3.5 million barrels in 1991 collapsed to a semi-stop  due to the invasion of Kuwait and the Gulf War, and then the gradual recovery began very slowly due to the economic embargo on Iraq to recover slightly after the oil-for-food program until 2003, when production reached nearly two million barrels, then collapsed due to the war of liberation to begin the recovery phase and very ambitious plans to provide financial liquidity to restore Iraq plans to reach 12 million barrels by 2012, but this goal is a crazy goal for several considerations that we do not want to go through.

This historical path of the extractive oil industry was accompanied by the same path for the manufacturing industry, perhaps more than the calamities, as the infrastructure suffered  from a significant shortage and continuous targeting of refining and refining facilities every time, which made Iraq suffer from fuel crises despite its large production, as it is today importing oil derivatives  in exchange for a delay and slowdown in completing liquidation projects and not completing them on time, as in the Karbala refinery, which is scheduled to enter into production in 2018. But until today it has not started actual production

Oil Manufacturing Industry

This industry includes the operations of converting oil from raw material to oil derivatives or other materials extracted from oil, which is a wide and multiple industry, but we will limit our talk here to a small part of it, which is oil refining operations or refineries.

Iraq owns three public refineries companies, the South  Refineries Company, which owns 3 oil refineries: Shuaiba, Messian,  Dhi Qar, and a refinery under construction, the Faw refinery, with a  total refining capacity of  approximately 570 thousand barrels per day, and the Central Refineries Company, which consists of 4 refineries:  Dora,  Najaf, Samawa andDiwaniyah. Three under construction are the Karbala-Anbar and Kut refineries with a combined refining capacity of 610 thousand  barrels,  and the North Refineries Company, which  owns 6 refineries,  namely Baiji Kirkuk, the Chinese modern Kasks, and Qayyarah with  a total  refining capacity of 400 thousand barrels per day.  The most important losses Iraq suffered in the refining industry is the loss of the Baiji refinery located in Salah al-Din province during the events of 2014, where this refinery was the largest in terms of production capacity, covering approximately 20% of Iraq's need for fuel.  The production capacity of the above refineries is at a maximum capacity of 1.7 million barrels / day but the  actual refining does not exceed 700 thousand barrels / day due to the outing of service of the  Baiji refinery with high production (about 310 thousand barrels per day) in 2014 and the presence of some refineries under construction.   Some are not operating at maximum capacity for obsolescence and other technical reasons.According to the plan, the  Karbala refinery with a refining capacity of 140  thousand barrels  per day will enter the actual work at the end  of this year, and the return of the Baiji refinery to its production capacity of 310 thousand barrels / day, which is scheduled to be gradually returned after the repair of the basic units in this refinery, and that the rest of the refineries are under construction,  such as the Faw refinery, which was signed with the Chinese side last year, and which is scheduled to complete the project in 2025, which is one of the largest refineries. Refining capacity of 300 thousand barrels / day. Also, refineries that need maintenance or replacement of dilapidated and out-of-service units due to obsolescence or military damage are also the ones that will provide the refining process with the needs of the market of products, which contribute to the gradual elimination of imports. Revenues from domestic oil derivatives are estimated at $5.3 billion, but these revenues are not invested locally, but are spent again importing oil derivatives that are not available locally.

Gas Industry

Iraq has large gas reserves that put it in eleventh place in the series of countries with an estimated reserve of about 131 trillion standard cubic feet distributed over three types, namely  free gas fields, associated gas and dome gas, where the first type represents the gas freely present in individual gas fields and independent of oil fields and reservoirs  , while the second type is the gas associated with oil and is found dissolved in oil in reservoirs under high pressures and is released as soon as the pressure disappears at production The third type is gas in the form of a gas dome above the oil reservoirs.

The vast majority of the proven reserves  of gas and the associated type,  where this type represents 71% of Iraq's gas reserves and is  mainly found in oil reservoirs in southern Iraq, followed by free gas by about 20%, while the dome gas is the least and represents about 9% of the proven reserves. 

The gas industry is closely linked with the oil extractive industry because  the Iraqi gas reserves of associated gas, a gas associated with oil and comes out with the method of accidental production of oil extraction operations, there is no way to store or benefit from it except by isolating it, investing it or burning it, which is not currently done, as this wealth is wasted due to the lack of projects and interest in oil extraction operations at the expense of associated gas investment.

Iraq has ten free gas fields, five of which are located in eastern and northeastern Iraq: the fields of Kor Mor, Chamgmal, Khashm al-Ahmar, Jiriya Yeka and Mansuriya and contain between them about  11 trillion cubic feet (about 300 billion cubic meters) as fixed reserves.  The Siba field (30 km south of Basra) and the Acre field (in the Western Desert near the Syrian border) contain  just over Two trillion cubic feet (about 100 billion cubic meters) of fixed reserves each, while the third type, which is  dome gas, which covers oil reservoirs,  is the least important type because it is the natural driving tool for oil production and  can only be produced in the final stages of oil fields where oil is depleted and this gas is dispensed with as an oil lifter.

The gas industry is one of the important industries that are no less important than the oil industries, as it is the main element and cornerstone  in the process of switching from fossil fuels to clean fuels or clean energy, as gas is the link in the transition process, as it is the hydrocarbon with little gas emission and little pollution compared to the rest of the fossil fuels.

Local need for fuel

Iraq's fuel needs are divided into the following needs: oil derivatives for domestic consumption and gas for electric power plants.

1-     The need for derivatives

The actual refining capacity of Iraq's refineries is estimated at about  700  thousand barrels per day, while the daily domestic need is about 1.3 million barrels, meaning there is a gap estimated at 600 thousand barrels, which is equivalent to 40% covered by imports.

 Iraq's import is mostly of gasoline fuel of low quality and high octane, which is commercially called regular and improved gasoline, which is a light product that is used as fuel for cars , as Iraq imported in 2021, according to the data of the Oil Marketing Company

·         The quantities of imported gas oil amounted to one million and 74 thousand tons, or approximately 7 million barrels, with a value of 657 million and 442 thousand dollars.

·         The quantities ofgasoline amounted to 3 million and  457 thousand tons, or approximately 21 million barrels, with a value of two billion and 543 million and 620 thousand dollars.

·         The quantities of white oil amounted to 163 thousand tons worth 102 million and 340 thousand dollars.

The most important reasons for the high local need for fuel are not because of industries or factories, but most of the imported fuel goes to cover the daily need for private  transportation The reason for the lack of public transportation, which shortens a lot  of the use  of personal wheels that consume fuel in large quantities, as personal wheels in Baghdad, according to the statistics of the General Traffic Directorate for the year 2021, are estimated at approximately 2.5 million cars

Refining capacities are estimated at 680,000 barrels per day, while the actual need ranges from 1.100 million to 1.400 million barrels per day..

2-     Local need for gas

The local need for gas is divided into two parts: liquid gas, which Iraq is achieving sufficiency of, and exports large quantities annually amounting to 139 thousand tons in 2021 worth 71 million dollars, and Iraq's exports of liquid gas were estimated at 456 thousand tons at a value of 288 million dollars.

The other section is dry gas, which is used as fuel for electric power plants, of which Iraq suffers from a shortage estimated at about twice its production.

Iraq has 26 gas-fired generating stations and the actual need for  these stations combined represents Iraq's total need for gas, which amounts to 3300 mqm per day, Iraq  produces approximately 3000 mg per day burns approximately 1650 due to the lack of insulation and treatment projects and if Iraq wants to reach full electrical production from the use of gas, this means its need to double the amount invested

Iraq imports the remaining quantities of about 1,500 maqqm from Iran and amounts exceeding $ 5 billion, according todata from the Iraqi Ministry of Oil.

Achieving self-sufficiency and switching to export

Self-sufficiency in dry gas is achieved in the event of the completion of the gas projects that are being worked on, and it is hoped that all of them will be completed by the end of 2025, namely the Nasiriyah gas investment project with a capacity of 200 mqmqm per day, the Halfaya field investment project with a capacity of 300 mqmqm per day, and the Artawi field project in its three stages with a capacity of 600 mqmqm per day, in addition to oil fields investment projects (free gas), the most important of which are the fields of Akas and Mansourieh.

In the case of oil derivatives, sufficiency of them depends on the completion of the refineries under construction and the return of the damaged units in the Baiji refinery, all of which may reach production  to more than the actual need, which leads to a shift from import to export, which will be a strong tributary to the state budget, which is what the reform paper (white paper) planned in its second part, paragraph 33 on reforming the refinery sector and diversifying Iraq's exports of oil derivatives.   

From the foregoing, it is clear that achieving self-sufficiency, but rather switching from an importer to an exporter of oil and gas derivatives, is not an impossible task, and that Iraq needs  the political will mainly to reach self-sufficiency in fuel, both types of oil and gas  derivatives,  as the current refineries, which are under construction,  and isolation and pressure projects for associated gas, which were contracted by the Ministry of Oil,  if it worked at its maximum capacity, would have achieved sufficiency.

Dispensing with the import of oil and gas derivatives will save about $ 10 billion annually that can be used to sustain refining and gas projects and add new projects and units and expand these projects contributes to Iraq's diversification of its exports, which suffer from unilateralism.