Iraq’s Common Seawater Supply Project (CSSP) has seen good progress in recent months, showing commitment from the oil ministry – a development that bodes well for upstream oil and gas activities in Basra.
The ambitious megaproject was first proposed by state-owned South Oil Company (SOC) in 2011.
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CSSP project 2019
Under the original plans, the CSSP was due to have a budget of $13 billion and the capacity to deliver 12.5 million barrels a day (b/d) of seawater through 426 kilometres of pipeline, including eight interconnecting stations and 10 delivery stations.
The huge scheme was designed to supply oil field operators with an ample supply of water for injection into ageing inland oil fields – in order to help maintain pressure and production rates.
Dialling it down
Since it was originally proposed the scheme has stalled on multiple occasions, creating extensive delays. It has also been scaled back dramatically in size. It is now expected that the water project will have an initial capacity of 5 million b/d, less than half the original proposed capacity. It has also had its budget slashed proportionately, in correlation with the reduction of capacity.
Part of the reason for the massive delays has been Iraq’s uncomfortable relationship with US-based Exxon, which was originally expected to drive the project forward.
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By GlobalDataThe scale of the project and the nature of the project – combining oil field expertise, pipeline technical knowledge and specialist water treatment plant facilities – meant that some analysts believed Exxon was the only company in the world that could carry out the task for a reasonable cost.
Talks between Iraq’s oil ministry and Exxon dragged on over the years due to an array of disagreements.
Problematic politics
One of the most notable problems was Exxon’s expansion in the autonomous region of Iraqi Kurdistan.
In December 2011, Exxon defied the Iraqi government by signing up to drill in territories that were claimed by both Baghdad and Erbil. The government must now decide whether to retaliate by kicking Exxon out of a giant oil field it is developing in the south of Iraq.
Political leaders in Baghdad said the company was putting the unity of Iraq at risk.
Hussain Shahristani, who was deputy prime minister at the time, said that Baghdad had not approved Exxon’s field development contracts in the north of the country and if the company proceeded to execute them it would be in breach of Iraqi laws.
Exxon’s departure
Exxon’s relationship with Erbil has made doing deals with Baghdad on projects problematic ever since – and been the cause of multiple delays to the CSSP.
Eventually, in June 2018, it was reported that Exxon had walked away from the CSSP.
This information was greeted with horror by those that had a stake in Iraq boosting production from the Basra region, which was seen as desperately needing the water to maintain oil production levels and hit targets over coming years.
However, it now seems that breaking off talks with Exxon has allowed the project to make real progress for the first time in eight years.
Since Exxon walked away, Hyundai Engineering & Construction has been selected to carry out the water treatment facility package for the project, and more than five companies have been prequalified for the pipeline package, which is expected to be tendered in the near future.
Right compromise
Analysts may have been right in 2011 when they said the scale of the project meant that only Exxon could execute it effectively – but now the project has been scaled down it seems other engineering, procurement and construction companies will have a chance of taking on the project.
Additionally, CH2M, the project management consultant on the project has made sure the design allows for later phases to upgrade the project’s capacity, so as demand for water increases in Basra, there will be scope to increase the flow through additional pipelines and water plants.
The progress made, and the apparent prioritisation of the CSSP since June 2018 by Baghdad, has been impressive and should pay dividends over the long term – as long as the project doesn’t run into future difficulties.
Not only will it supply ample water for the ageing oil fields in Basra – and give peace of mind for operators that are planning water injection projects – it will also increase stability in the area, which has suffered regular civil unrest over recent years.
Water security
The increasing demand for water injection in oil fields locally, coupled with Turkey and Syria siphoning off water from the Tigris and Euphrates, has dramatically decreased the volume of available potable water available in the region.
In September 2018, the hospitalisation of 30,000 people who drank polluted water led to a week of violent protests, 12 deaths, and the torching of government buildings, political offices and the Iranian consulate.
Protesters have also frequently targeted oil fields. During 2018 oil production remained largely unaffected by the protests as the military was sent in to protect key infrastructure.
Over the long term, however, it is key that the water crisis itself is addressed to help ease tensions and improve oil field security.
It is likely that, if the rapid progress seen over recent months continues, the CSSP will play a key role in solving the region’s water crisis and improving the business environment for oil companies in the region.
MEED
This article is sourced from Power Technology sister publication www.meed.com, a leading source of high-value business intelligence and economic analysis about the Middle East and North Africa. To access more MEED content register for the 30-day Free Guest User Programme.
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