平成 30 年度質の高いエネルギーインフラの海外展開 に向け …平成 30...
TRANSCRIPT
経済産業省 御中
平成 30 年度質の高いエネルギーインフラの海外展開
に向けた事業実施可能性調査事業
（イラク国南部油田放散ガスの有効活用と CO2・SOx
排出量削減に向けた事業性調査）
調査報告書（英文）
Project to Promote Overseas Sales of Quality Energy Infrastructure Systems in Fiscal Year 2018 Investigation of Possibility of Japanese Technology Implementation in Oil / Gas Production Facilities in Iraq
March 2019
Toyo Engineering Corporation
i
This study was conducted as “Project to Promote Overseas Sales of Quality Energy Infrastructure
Systems in Fiscal Year 2018” by METI.
This study is to investigate the feasibility of associated gas export project from South Iraq oil fields
to Kuwait, which is currently flared in Iraq, which contributes for improvement of environment by
reduction of CO2 and SOx. The project is set to be implemented by Special Purpose Company (SPC)
in which Japanese and Kuwait state-owned companies are examining the possibilities to invest,
considering Iraq financial challenge, and SPC construct, own and operate the gas treatment facilities
and the pipelines, gaining the income from tolling fee paid by Kuwait.
Iraq, who needs solutions for large amount of flared gas, and Kuwait, who has rapidly growing
demand of gas for power generation, are both expecting prompt start of the study. The discussion
between Iraq and Kuwait Governments is facing the deadlock due to the negotiation of the gas selling
and buying prices, even though they have discussed the conditions since 2014. To break through the
current situation, the adjustment from the neutral point of view by the third party is supposed to be
necessary, and this study is aiming to show the way for entire agreement by both governments on the
project by proposing the methodology for setting gas prices.
ii
Content
Introduction ..................................................................................................................... 12
1.1 Background ............................................................................................................... 12
1.2 Significance of Project for Iraq and Kuwait ............................................................... 13 1.2.1 Trends in Iraq energy policies ................................................................................... 13 1.2.2 Trends in Kuwait energy policies .............................................................................. 13 1.2.3 Benefits for Iraq and Kuwait ...................................................................................... 14
1.3 Objectives of Study ................................................................................................... 14
Current Status of Iraqi Oil & Gas Fields ...................................................................... 16
2.1 Overview.................................................................................................................... 16
2.2 Current Gas Utilization status ................................................................................... 20
2.3 Gas Pipelines Status ................................................................................................. 22
Data Collection, Examination and Analysis ................................................................ 26
3.1 Selection of gas source for the study ........................................................................ 26
3.2 Gas Production Volume and Available Gas Volume for Export ................................ 26
3.3 Gas Composition of Associated Gas ........................................................................ 26
Summary and Basis of Facility Planning ..................................................................... 28
4.1 Gas Export Volume from Oil Fields ........................................................................... 28
4.2 Capacity Planning for Major Facilities ....................................................................... 29 4.2.1 Block Flow of Facilities .............................................................................................. 29 4.2.2 Material Balance ....................................................................................................... 29 4.2.3 Capacity Planning for Major Facilities ....................................................................... 30
Facility Planning ............................................................................................................. 31
5.1 Facility Configuration ................................................................................................. 31
5.2 Compression Station ................................................................................................. 32 5.2.1 Compressors ............................................................................................................. 32 5.2.2 Gas Dehydration Unit (GDU) .................................................................................... 32 5.2.3 Dew Point Control Unit (DPCU) ................................................................................ 32 5.2.4 Gas Sweetening Unit (GSU) ..................................................................................... 33
5.3 Gas Pipeline .............................................................................................................. 34
5.4 Other Facilities .......................................................................................................... 34
iii
5.5 Facilities Excluded for this Study .............................................................................. 34
5.6 EPC Cost of Facilities ............................................................................................... 34
Economic Study and Proposal for Gas Price Setting Mechanism ........................... 36
6.1 Objectives of Project Economic Study ...................................................................... 36
6.2 Scope of Study and Methodology ............................................................................. 36
6.3 Methodology of Economical Study ............................................................................ 37
6.4 Study Result .............................................................................................................. 40
6.5 Sensitivity Analysis .................................................................................................... 40
6.6 Gas Price Consideration ........................................................................................... 41
6.7 Proposal for Gas Price Setting .................................................................................. 41 6.7.1 Fixing Feed Gas Price .................................................................................................. 41 6.7.2 Fixing Product Gas Price .......................................................................................... 41
Project Implementation .................................................................................................. 42
7.1 Overall Project Roadmap .......................................................................................... 42
7.2 EPC Schedule ........................................................................................................... 42
CO2/SOx Reduction Impact Study ............................................................................... 44
8.1 International Organization for CO2/SOx Reduction .................................................. 44 8.1.1 Iraq Greenhouse Gas Reduction Target under UNFCCC ......................................... 44 8.1.2 Iraq under GGFR ...................................................................................................... 44
8.2 CO2/Sox Reduction Effects ...................................................................................... 46
Study of Advantage and Benefit in Japanese Industry .............................................. 47
9.1 Confirmation of Advantage of Japanese Industry ..................................................... 47
9.2 Applicable Japanese Technologies, Solutions and Those Advantage ..................... 47 9.2.1 Supply of Equipment, Materials and Solutions ......................................................... 47 9.2.2 Profits through Commercialization ............................................................................ 49 9.2.3 Stable Operation of Oil Field ..................................................................................... 49
Proposal and Recommendation to Iraq Side・Way Forward .................................. 50
Discussion with Iraq and Kuwait ................................................................................ 52
11.1 Background before Study .......................................................................................... 52
11.2 First Meeting with Iraq side ....................................................................................... 52
11.3 Second Meeting with Iraq side (Workshop) .............................................................. 52
11.4 Final Review Meeting ................................................................................................ 53
iv
Figures
Figure 2-1 Oil & gas infrastructures in southern Iraq ................................................................. 17 Figure 2-2 Oil & gas infrastructure in Iraq ................................................................................. 17 Figure 2-3 Monthly oil & gas production and flared gas ............................................................ 21 Figure 2-4 Block flow of existing LPG/NGL plants in southern Iraq ......................................... 21 Figure 2-5 Iraq gas pipeline network (Dry gas) .......................................................................... 23 Figure 2-6 Iraq gas pipeline network (LPG) ............................................................................... 24 Figure 2-7 Iraq gas pipeline network (NGL) .............................................................................. 25 Figure 4-1 Block flow for gas export .......................................................................................... 29 Figure 5-1 Tie-in Concept between Compression Station and Degassing Station ...................... 31 Figure 5-2 Conceptual flow of GDU .......................................................................................... 32 Figure 5-3 Conceptual flow of DPCU ........................................................................................ 33 Figure 5-4 Conceptual flow of GSU ........................................................................................... 33 Figure 6-1 Scope of Economic Study ......................................................................................... 36 Figure 6-2 Approach of Economic Study ................................................................................... 37 Figure 6-3 Spot Prices for Hydrocarbons (2002/01–2018/10) .................................................... 39 Figure 6-4 NGL Price by Year .................................................................................................... 39 Figure 6-5 NGL Composite Price ............................................................................................... 40 Figure 6-6 CP Price Profile for LPG ........................................................................................... 40 Figure 7-1 Overall Project Roadmap .......................................................................................... 42 Figure 7-2 EPC Schedule ............................................................................................................ 43 Figure 8-1 Top 30 Flaring Countries in the World ...................................................................... 45
v
Tables
Table 2-1 Iraq License rounds results ......................................................................................... 19 Table 6-1 Feed/Product Price ...................................................................................................... 38 Table 6-2 Heating Value of Gaseous Fuel ................................................................................... 41
vi
Uni ts and Abbrevia t ions
In this report, following units and abbreviations are used. Units
Meaning Remarks
/d Per day 1bbl/d = 1Barrel per day: BBD
/yr Per year 1bbl/yr = 1Barrel per year
barg Gauge Pressure Gauge pressure is zero-referenced against ambient air
pressure.
BBL Barrel）
1bbl = 159l 1lMbbl = 1,000bbl 1MMbbl = 1,000,000bbl
BBL/D = BBD
BBL/STB
rb/STB Volume factor of oil, Bo
degC Temperature (Celsius) degC = 5/9*（degF-32）
degF Temperature(Fahrenheit) degF = 9/5*degC + 32
ft Feet (Length) 1ft = 0.3048m
inch
" Inch (Length)
1inch = 25.4mm 13 3/8” = 13 and 3/8 inch
lb Pound 1lb = 453.59g
BTU British Thermal Unit
mol% Molar Fraction
NM3 Normal cubic meter
Pa Pascal 1Pa = 0.000145psi
ppm Parts per million 1ppm = 0.0001%
psi Pound per square inch (Pressure)
6,895Pa = 0.068 Atm (Approx.)
psia Pound per square inch
(Absolute Pressure) psia = psig + atmospheric pressure at the location
psig Pound per square inch
(Gauge Pressure)
scf Standard cubic feet 1scf = 0.0283m3 MMscf = 1,000,000 scf
STB Stock tank barrel Volume of Oil at Standard Conditions
vii
Meaning Remarks
ton 1000 kg
USD US dollar MMUSD = 1,000,000 USD
VA Volt Amperes Measurement of power in a direct current (DC)
electrical circuit
W Watt 1W = 1V×1A
Abbreviations
Abbreviations Formal Name / Meaning
AG Associated Gas
API American Petroleum Institute
BGC Basrah Gas Company
BOC Basra Oil Company
CAPEX Capital Expenditure
CBI Central Bank of Iraq
COP24 The 24th Conference of the Parties to the Nations Framework Convention on
Climate Change
CPF Central Processing Facility
CS Compression Station
DCS Distributed Control System
DG Dry Gas
DPCU Dew Point Control Unit
DS Degassing Station
EOR Enhanced Oil Recovery
ECA Export Credit Agency
EIA U.S. Energy Information Administration
EPC Engineering-Procurement-Construction
ERP Enhanced Re-development Plan
FDP Field Development Plan
FEED Front End Engineering Design
FID Final Investment Decision
FS Feasibility Study
GDU Gas Dehydration Unit
GGFR Global Gas Flaring Reduction
GHG Greenhouse Gas
viii
Abbreviations Formal Name / Meaning
GIIP Gas Initial in Place
GMP Gas Master Plan
GOR Gas oil Ratio
GSU Gas Sweetening Unit
GT Gas Turbine
GTC Gas Turbine Compressor
GWC Gas Water Contact
H.H. Henry Hub
HP High Pressure
HSE Health, Safety & Environment
IC Interconnection
IEA International Energy Agency
IENA Iraq Energy Academy
IG2K Iraq Gas to Kuwait
IMEC Inter Ministry Energy Committee
INES Integrated National Energy Strategy
IOC International oil Company
IRR Internal Rate of Return
ISO International Organization for Standardization
JBIC Japan Bank for International Cooperation
JCCP Japan Cooperation Center Petroleum
JETRO Japan External Trade Organization
JICA Japan international Cooperation Agency
JOGMEC Japan Oil, Gas and Metals National Corporation
KOC Kuwait Oil Company
KPC Kuwait Petroleum Company
LNG Liquefied Natural Gas
LP Low Pressure
LPG Liquefied Petroleum Gas
METI Ministry of Economy, Trade and Industry
MoE Ministry of Electricity
MoO Ministry of Oil
MOU Memorandum of Understanding
ix
Abbreviations Formal Name / Meaning
MP Middle Pressure
NA Not Applicable
NACE National Association of Corrosion Engineers
NGL Natural Gas Liquid
NOC National Oil Company
NPV Net Present Value
OPEX Operating Expense
PDP Preliminary Field Development Plan
PI Profitability Index
PPP Public-Private Partnership
Pre-FS Preliminary Feasibility Study
SCADA Supervisory Control and Data Acquisition System
SGC South Gas Company
SOC South Oil Company
SPC Special Purpose Company
SRU Sulfur Recovery Unit
SSC Sulfide Stress Cracking
TEG Triethylene Glycol
TOYO Toyo Engineering Corporation
TSC Technical Service Contract
UNFCCC United Nations Framework Convention on Climate Change
x
Executive Summary
Flare gas from oil fields in Iraq has been regarded as a problem in terms of economy and
environmental pollution for a long time, and Iraq Government is trying flare gas reduction by
participating in the “Zero Routine Flaring by 2030” Initiative lead by the World Bank. On the other
hand, in the neighboring country, Kuwait, the electric demand has increased rapidly because of
population growth these days, so Kuwait Government put high priority on the enhancement of electric
power generation capability and has shifted their policy to make up the shortage of domestic gas for
power generation with imported gas from other countries. Iraq and Kuwait Governments have
discussed gas trade as an effective solution for both countries’ challenges for years and concluded a
basic agreement for gas trade, but the gas price have not concluded yet. The purpose of this
investigation is to show a path for agreement conclusion between Iraq and Kuwait by proposing
methodology for gas price setting from a neutral point of view by a third party, as well as to study
economic feasibility and effect of reduction of environmental load.
Iraq is the country which has the fifth largest crude oil reserves confirmed in the world in 2017 and
has the twelfth largest gas reserves, and because of the under-developed domestic gas processing
facilities and related infrastructures, approximately 1,700MMscfd gas was flared in December 2018,
which equals more than half of the gas produced in Iraq. As a solution for flare gas reduction, Iraq
Government is proceeding with construction and improvement of gas processing facilities by Basrah
Gas Company (BGC), which enabled BGC to collect approximately 1,000MMscfd associated gas in
oil fields. However, the domestic gas processing facilities, pipelines and related utilities have not
developed sufficiently, and Iraq is importing gas from Iran as a temporally measure for domestic gas
supply.
In this report, the economic feasibility study was implemented considering the difference of gas
composition and gas export capacity of the target oil fields with combination of the fields.
The EPC cost was estimated considering the export pipeline lengths and other necessary facilities
such as compression facilities and gas processing facilities.
In this study, CAPEX was calculated on basis of the EPC cost above and OPEX which was estimated
by the data of similar facilities in the areas nearby. Based on these figures, the Internal Rate of Return
(IRR) and the Net Present Value (NPV) as prevalent indexes were calculated to examine economic
efficiency of each case. The price of the gas and the products were set referring to The U. S. Energy
Information Administration (EIA) published prices and U. S. Henry Hub (H.H.) Prices. C1-C4 were
considered as the products, while C5+ was considered to be consumed in Iraq
The associated gas, which is used in this study, differs in its compositions by oil fields, and moreover,
the compositions changes during its production. Therefore, the gas composite prices (USD/MMBTU)
xi
of both the feed gas and the product gas were calculated by the gas composition ratio and heating value
of each gas component, and used for examination of Iraq’s gas selling price and Kuwait’s gas buying
price as follows.
First, the feed gas was fixed as a price which is close to the feed gas (C1-C4) composite gas price
and the product gas price was varied. Then, the product gas was fixed as a price which is close to the
product gas (C1-C4) composite gas price and the feed gas price was varied.
In this gas trade project, Special Purpose Company (SPC), in which the Japanese companies
including TOYO and a Kuwait state-owned company are examining the possibilities of their
investment, will act as an entity implementing facility construction and operation. Considering that
the facilities are constructed in Iraq, the investment in SPC by an Iraq state-owned company and
foreign companies who are operating the designated oil fields is also beneficial in terms of security of
gas volume exported, and the project scheme will be determined based on the discussion with Iraq and
Kuwait Governments and other private companies. Following the result of this study, the detailed
Feasibility Study (FS) using updated data provided by Iraq to be started in the latter half of 2019 will
be proposed to Iraq and Kuwait Governments. After Final Investment Decision (FID), EPC of the
facilities will start in 2021, and after the 2 years, the gas export to Kuwait is expected to start in 2023.
Iraq, who is participating in the United Nations Framework Convention on Climate Change
(UNFCCC), is aiming the reduction of the greenhouse gas emission by 14%, which equals to 50
million tons per year from 2020 to 2035. In this gas exporting project as the result of this study, the
amount of CO2 and H2S is expected to be reduced with large ratio of the target. Additionally, the flare
gas reduction contributes much for improvement of air pollution in Iraq, in that it means reduction of
not only greenhouse gases but also SOx, NOx and Black Carbon.
As the benefits for Japanese companies, the supply of pipes for pipelines, rotating machines and
Supervisory Control and Data Acquisition System (SCADA) and the provision of related services by
Japanese companies are expected.
TOYO had two meetings with Iraq side during this study. Final Review Meeting by the end of
February 2019 was proposed, however, it could not be realized. TOYO visited Iraq and tried to have
a meeting in the beginning of March 2019, however, it could not be held as well.
Although due to personnel changes in Iraq and Kuwait Governments and state-owned companies
during this study, timely report of the study outcome could not be made for the both governments,
TOYO will continue to try to discuss with them and other related parties for realizing the project,
which has benefits for both of Iraq and Kuwait.
12
Introduction
1.1 Background
According to the World Bank Global Gas Flaring Reduction (GGFR), Iraq is ranked as the second in
the amount of flare gas in 2017, and the flare gas from oil fields in Iraq has been regarded as a problem
in terms of economy and environmental pollution for a long time. Before the Gulf War (1990-1991),
associated gas from Rumaila oil field in Iraq was exported to Kuwait through the pipeline to Ahmadi,
Kuwait (total length 170km, capacity 400MMscfd), but after Kuwait Invasion by Iraq in 1990, the gas
has been stopped and the effective solution for flare gas utilization in South Iraq has not been adopted.
The Integrated National Energy Strategy (INES), which was made by Booz & Company sponsored
by the World Bank in 2012 reports the air pollution and greenhouse gas emission caused by flare gas
whose amount equals approximately 40% of the gas produced in Iraq, and recommends gas export to
Kuwait as the best solution. The reason of the large amount of flare gas in Iraq is insufficient gas
pipelines and gas treatment facilities. The INES proposes the necessity of appointing a technical
consultant company for Master Gas System establishment. Following this, TOYO and Mitsui & Co.,
Ltd. made contract with Japan International Cooperation Agency (JICA) for establishment of Gas
Master Plan in Iraq to study gas supply and demand in Iraq, in which gas export to neighboring countries
such as Kuwait is proposed as one of effective and temporary method to utilize flare gas until the
domestic gas infrastructure completion. TOYO has proposed gas export to Kuwait as the most effective
way of flare gas usage to Iraq MoO since the GMP implementation. In April 2018, Prime Minister Abadi
in Iraq requested TOYO’s cooperation to proceed with the project promptly during the Prime Minister’s
visit in Japan, and TOYO has continued discussion on the implementation methodology with Iraq
Government.
On the other hand, in Kuwait, the electricity consumption is increasing year by year from 40 billion
KWh/yr in 2010 to 54 billion KWh/yr in 2018. Gas demand for power generation is increasing and
prompt start of gas import from Iraq is necessary. Under this situation, the Prime Minister Jabir in
Kuwait during his stay in Japan requested support by Japanese Government to the Prime Minister Abe
in Japan in May 20161.
The basic agreement on the gas trade between Iraq and Kuwait Government was made in December
2016, but after that the entire agreement of gas selling and buying price has not concluded yet, so that
the facility construction has not started.
It can be said that the needs of Iraq and Kuwait Governments meets each other, and, considering
limited gas resource and environmental influence, the flare gas reduction by gas export from Iraq to
Kuwait is an urgent challenge. To break the deadlock of the gas price negotiation and lead both
governments to an agreement, it is supposed to be necessary for the third party to show the way by
1 According to KPC in May 2016.
13
study of economic feasibility and gas price setting methodologies.
1.2 Significance of Project for Iraq and Kuwait
1.2.1 Trends in Iraq energy policies
Following the necessity of solutions against flare gas pointed by INES, Iraq Government is
participating in the “Zero Routine Flaring by 2030” Initiative advocated by the World Bank in 2017,
and the Oil Minister Luaibi declared in 2018 that Iraq aims zero gas flaring by 2021. Although Basrah
Gas Company (BGC), a joint venture by South Gas Company (SGC), Shell and Mitsubishi Corporation,
is constructing the gas processing facilities in South Iraq oil fields to achieve these targets, flare gas in
Iraq has been increasing as 1,715MMscfd in December 2018, and it seems that it is difficult for Iraq to
achieve zero flare gas by 2021 even the planned facilities are completed.
Iraq has been importing gas from Iran to satisfy gas demand and use it for power generation since
2017. This is because the sufficient gas facilities and pipelines to send gas to power generation plants
have not been constructed yet and until the completion of those facilities associated gas cannot help
being flared. The background of such insufficient investment in domestic energy infrastructure is
financial challenges due to the increase of national defense expenditure caused by Islamic State (IS)
expansion and income decrease caused by a sharp fall of the crude oil price, both of which started in the
summer of 2014.
The new government was inaugurated as a result of the election for National Assembly in June 2018
and more budget is allocated to economy development due to decrease of the national defense
expenditure and rising crude oil price, but still economic and political affairs remains instability, shown
in demonstrations caused by high unemployed rate and under-developing infrastructures including
electricity and water, and the development of infrastructure and employment policies headed by the
government is required.
1.2.2 Trends in Kuwait energy policies
Kuwait had established the Kuwait Development Plan (KPD) from 2015 to 2019 as a part of “Kuwait
Vision 2030” aiming economic diversification to reduce dependence on oil income, in which Kuwait is
planning more than 110 billion USD investment for about 500 infrastructure projects by public private
partnership (PPP). In addition, Kuwait declared “New Kuwait” vision in 2017 and is aiming to make
the Kuwait a center of business and culture.
One of the areas regarded as important in these development plans is electricity. Population in Kuwait
in 2017 is over 4 million, 1.7 times as many as that of a decade ago partly because of inflow of foreign
labor according to the World Bank, and the electricity demand in Kuwait is rapidly increasing. The
14
government is planning to develop the capability of the power generation to 27,000MW in 2025, which
was 15,700MW in 2013. The electricity price was set as 5% of the cost by the government with the rich
oil income, but in July 2017 the electricity price in the industry was raised by 12.5 times doe to increase
of financial burden caused by decrease of oil income, and even the additional raise of the price is
discussed. In Kuwait natural gas is used for power generation, desalination of sea water, petrochemical
production, enhanced oil recovery (EOR) etc. A state-owned Kuwait Oil Company (KOC), who
manages the upstream of oil and gas, released that they will increase the gas production to 3,000MMscfd,
which is twice as the current gas amount produced, by 2030.
Kuwait announced their target of non-associated gas production as 2,000MMscfd by 2040 in the
Japan Cooperation Center Petroleum (JCCP) symposium in January 2019, while currently the majority
of the domestic gas production in Kuwait is associated gas from oil fields and Kuwait has been a net
importer of gas since 2008. Especially at the peak of power demand during summer, the domestic gas
cannot satisfy its demand, so Kuwait shifted their energy policy to make up the shortage of domestic
gas for power generation with imported gas from other countries, and now constructing the LNG
receiving terminal. Kuwait is also aiming to increase the rate of the renewable energy to 15% of the
total power generation.
1.2.3 Benefits for Iraq and Kuwait
Gas export to Kuwait enables Iraq, who puts high priority to flare gas reduction, to acquire foreign
currency and contributes for improvement of air pollution causing health damage by reduction of CO2
and SOx emission. Moreover, the gas processing facilities and pipelines transferred to Iraq after the
project duration is also a large benefit for Iraq, considering the insufficient energy infrastructure due to
financial challenge of the Iraq Government. In Kuwait, as they recognize that it is urgent to ensure the
stable gas supply for power generation, gas import from the neighboring country is the promptest
solution. Considering the supply and demand balance between Iraq and Kuwait, it can be said that this
project is very beneficial to both countries.
1.3 Objectives of Study
The objective of this study is to investigate economic feasibility of associated gas export from Iraq to
Kuwait which is currently flared in South Iraq. In the study, the impact on environment was also
examined, as the CO2 and H2S reduction will be achieved once the project is implemented.
The gas trade between Iraq and Kuwait should be realized promptly in terms of gas supply and
demand in the both countries and the environmental burden. To break a deadlock of price negotiation
between both governments, this study is also to show a path for agreement conclusion between Iraq and
Kuwait by proposing methodology for gas price setting.
15
In addition to the above, following the historical background where the Iraq and Kuwait Governments
have requested support by Japanese Government and cooperation by Japanese Companies, TOYO
proposes a project implementation scheme from a neutral point of view, by Japanese companies’
involvement including supply products and services and investment.
16
Current Status of Iraqi Oil & Gas Fields
2.1 Overview
Iraq is a leading country in the world in terms of oil & gas producer. According to the US EIA
Analysis Report 2018, proven reserves in Iraq are as follows.
Proven Oil Reserves 149 Billion barrels (Boe)
Fifth in the world（9% Global, 18% Middle East）
Proven Gas Reserves 135 Trillion cubic feet (Tcf)
Twelfth in the world
About 75% of gas is associated gas from oil fields
Ministry of Oil Iraq reported oil and gas production and export in December 2018 as below;
(Refer to the monthly statistic report on the website Ministry of Oil)
Crude oil production 4,465 kBPD （Southern Iraq*1 :3,934 kBPD）
Crude oil export 3,726 kBPD （Southern Iraq :3,195 kBPD）
Gas production 3,159 MMscfd （Southern Iraq :2,741 MMscfd）
Gas Flared 1,715 MMscfd （Southern Iraq :1,619 MMscfd）
Southern Iraq includes the oil & gas production fields controlled by Basra Oil Company, Thi-Qar
Oil Company and Missan Oil Company
The difference between oil production and export shows domestic supply for refinery feed and
fuel for power plants but the refinery feed is much more than power plant fuel.
More than one hundred of discovered oil and gas fields, some are super or giant fields and some are
small scale, are identified and distributed in whole Iraq. 89% of the fields are located in southern Iraq
where most of super or giant fields are placed. (Refer to the Figure 2-1 and Figure 2-2 below)
17
Figure 2-1 Oil & gas infrastructures in southern Iraq
（Source :SEP Global Platts）
Figure 2-2 Oil & gas infrastructure in Iraq
（Source: Oxford Iraq Report）
18
Iraq has conducted five-time license rounds for oil and gas development open to the international
oil companies (IOCs) since 2009 and some fields are already developed for some extent. As the
results, oil production increased from around 2,400 kBPD in 2009 up to around 4,500 kBPD in 2018.
Target oil production and estimated oil reserves together with the current production at the time of
license rounds are shown in Table 2-1 below. Simple summation of target oil production is over
12,000 kBPD which may be exceeding current oil production in Saudi Arabia. Afterwards, IEA issued
Iraq Energy Outlook Report in 2012 and World bank issued Integrated National Energy Strategy
Report in 2013 which made Iraq modify the target oil production downwards by reducing target oil
production in some oil fields. At the time of Gas Master Plan study conducted by TOYO in 2015, the
whole target peak production was reduced to the around 9,000 kBPD which was a basis of associated
gas production estimation. Since then, further reduction of the target oil production amendment was
agreed between Iraq and IOCs, therefore this study incorporated those latest amendments. It seems
that currently Iraq sets oil production target around 6,000 kBPD.
Most of IOC proposed the year 2017 in which target oil production to be achieved, however this
target have not been achieved yet but stayed at early production development level. This is mainly
because of military cost increase due to IS, decrease of oil development budget and payment delay to
respective operators.
19
Table 2-1 Iraq License rounds results
（Source: GMP study report 2015）
Iraq License Round Summary
1st round results (June 29-30, 2009)
Field Name ContractorsMain
TargetProduction
2009Target
productionReserves
BbblRumaila BP, CNPC Oil 1,000 2,850 17.8
West Qurna 1 EM, Shell Oil 270 2,325 8.6
Zubair Eni, Oxy, Kogas Oil 205 1,200 4.0
Missan Group CNOOC, TPAO Oil 86 450 1.6
1st. round total 1,561 6,825 32.0
2nd round results (Decmber 11, 12, 2009)
Field Name ContractorsMain
TargetProduction
2009Target
productionReserves
BbblWest Qurna 2 Lukoil, Statoil *1 Oil 0 1,800 12.9
Majnoon Shell, petronas Oil 55 1,800 12.6
Halfaya CNPC, Petronas, Total Oil 3 535 4.1
Garaff Petronas, Japex Oil 0 230 0.8
Badra Gazprom, Kogas, Petronas, TPAO Oil 0 170 0.1
Qaiyarah Sonangol Oil 2 120 0.9
Najmah Sonangol Oil 0 110 0.9
Ahdab *2 CNPC Oil 115 200 0.7
2nd. round total 175 4,965 33.0
*1 Statoil phased out in Mar 2012
*2 Single source contract
3rd. round results (Oct 20, 2010)
Field Name ContractorsMain
TargetProduction
2009Target
productionReserves
BbblMansuriyah Kuwait Energy, Kogas, TPAO Gas 0 na 3.3
Akkas Kogas, KazMunaiGas Gas 0 na 2.1 - 4.0
Siba Kuwait Energy, TPAO Gas 0 na 0.1
3rd. Round total 0 na max 74
4th round results (May 30 - 31, 2012)
Field Name ContractorsMain
TargetProduction
2009Target
productionReserves
Bbbl
Block 8 Pakistan Petroleum Oil/Gas na na na
Block 9 Kuwait Energy/Dragon/TPAO Oil na na na
Block 10 Lukoil/Inpex Oil na na na
Block 12 Bashneft/Premier Oil ma na na
20
2.2 Current Gas Utilization status
Three gas fields were awarded to IOCs and currently under development stage but none of them has
not yet started production, therefore all the current gas production volume mentioned above is
associated gas from oil fields. About 54% of gas produced is being flared without utilizing effectively,
but the rest of gas is being treated and recovered. Generally speaking, the oil production was the first
priority and the gas produced were thought as wastes rather than the valued energy source for long
time for the purpose of cost reduction. Nowadays the global environmental protection becomes higher
concern and the flared gas capture became much more important subject to solve than before and Iraq
started gas capture project in 2013 and the project is on the half way in 2019. Figure 2-3 shows the
monthly historical crude oil production, gas production and the flared gas data since September 2008
till December 2018. (Source: Iraq Ministry of Oil)
In order to reduce fare gas, rehabilitation and new project of gas treatment facilities are ongoing by
BGC (Basrah Gas Company) and its target volume of flare gas capture was set 2,000 MMscfd.
According to the recent news the project has reached gas capture level around half of the target in
December 2018. The gas sources are the associated gas from giant oil fields Rumaila, Zubair and West
Qurna phase-1 based on the contract. It is supposed that the major BGC activities so far to achieve the
target are to rehabilitate the existing two old LPG/NGL plants (Design capacity is 1,050 MMcfd)
located in southern Iraq and the obsolete gas compression stations of each oil field. It is said that the
target gas capture volume will be achieved by on-going plan by constructing additional new gas
treatment plants in the near-by area. Out of recovered gas, dry gas is utilized for domestic power
generation and LPG is for mainly domestic use/partially for export and NGL is also utilized for export.
21
Figure 2-3 Monthly oil & gas production and flared gas
(Source: Iraq MoO website monthly report)
Figure 2-4 below shows a block flow of existing LPG/NGL plants in southern Iraq
Figure 2-4 Block flow of existing LPG/NGL plants in southern Iraq
(Source: GMP Report 2015)
Dry Gas to users & Northern Gas System Connection
Design Capacity (2 Trains)Raw Dry Gas 350 MMscfd (Extraction)
330 MMscfd (Surplus)Liquid
Broad cut liquids
Raw Dry Gas
Liquid
Dry Gas Dry Gas
Raw Dry Gas LPG/NGL LPG/NGL Export
Liquid Broad cut liquids bUmm Qasr Terminal
Design Capacity (2 Trains) Design Capacity (3 Trains) Receiving & Storage 350 MMscfd x 2 (Extraction) 4,400 MTD x 3
To Kuwait (Closed)
Luhais FieldDS/CS/GDU
N-Rumaila FieldDS/CS/GDU
N-RumailaNGL Plant
S-Rumaila FieldDS/CS/GDU
KAZNGL Plant
KAZ LPG Plant 3,000 MTD LPG
Zubair FieldDS/CS/GDU
IRT/IST LPG DEPOT 3,000 MTD LPG
22
2.3 Gas Pipelines Status
There are several gas pipeline networks in Iraq according to the GMP report 2015. They are segregated
into Dry Gas (C1+C2), LPG (C3+C4) and NGL (C5+). The networks of respective pipelines are shown
in Figure 2-6-1, 2, 3 below. These figures were prepared by TOYO based on the various opened
information such as Oxford Iraq Report 2010 and also the talks during workshop with MoO in 2011.
These are, Strategic Pipeline between north and south of Iraq, Baghdad National Pipeline, North
Pipeline, import/export pipelines between neighboring countries Syria (Old & newly planned), Kuwait
and Iran (Baghdad and Basrah). Some planned pipelines are BABUCCO Pipeline, Arab Gas Pipeline.
It seems that there are not remarkable changes since then, however it is recommended to investigate the
latest conditions of pipelines as well as its capacity and current operations including the progress of
planned new pipelines.
As far as the Iranian gas import concerned, two routes of pipeline are already in place and the gas
import is in normally operated. The Iranian side pipeline is branched from so-called IGAT #6 pipeline
and gas is dry gas from South Pars gas fields refined at Assoluyeh. In Iraq side the import pipeline is
connected to several power plants in Baghdad and Basrah which is independent from Iraq dry gas
pipeline network. The purpose of this gas import is to supply gas to power plant as the fuel and improve
the power shortage till the Iraq domestic gas infrastructures in Iraq are in place and the contract period
is only 4 years according to the news sources. There is a possibility to extend the pipeline towards EU
gas market.
With regards to the Kuwait gas export pipeline, 40” raw gas pipeline was in place and gas was exported
from southern Iraq to Ahamadi gas plant in Kuwait before Kuwait invasion war by Iraq, but the pipeline
has been closed since then and Iraq side pipeline has been utilized for other purposes. The current status
of the pipeline will be reported later to TOYO by MoO.
23
Figure 2-5 Iraq gas pipeline network (Dry gas)
(Source: GMP report 2015)
24
Figure 2-6 Iraq gas pipeline network (LPG)
(Source: GMP report 2015)
25
Figure 2-7 Iraq gas pipeline network (NGL)
(Source: GMP Report 2015)
26
Data Collection, Examination and Analysis
3.1 Selection of gas source for the study
It was supposed to receive the latest information for the study from MoO. However, the information
could not be received during the study period and the available export gas to Kuwait was estimated
based on the data obtained from GMP study in 2015 together with the latest information on the open
sources such as the changes in oil & gas fields development plans.
Three gas fields are under development and two of them, Akkas gas field and Mansuriyah gas field,
are excluded from the candidate because those are located north or north/west region of Iraq. Only Siba
gas field is located in southern Iraq and could be a candidate for the gas source for the study from
geographical point of view however it was not considered due to unclear development schedule at this
moment.
Power demand in Kuwait is increasing day by day, while domestic gas production as the fuel for power
generation cannot be following the demand. Kuwait requires more gas for power generation and a big
project to construct LNG import and receiving facilities are in progress at Al Zour. However, pipeline
gas import can still be considered by Kuwait because its price is cheaper than LNG basically. On the
other hand, under the situation of delay of infrastructures construction for flare gas utilization, there is
need in Iraq to export the gas being flared at this moment. According to the news sources, both of the
governments met and discussed on the scheme and reached an agreement except gas price so far.
3.2 Gas Production Volume and Available Gas Volume for Export
Same method as GMP study was used for gas production volume estimation. (i.e. Gas production
volume is calculated using oil production rate and GOR. Gas volume of each component is calculated
using gas production rate and gas composition data. Refer to Figure 3-1 Flowchart of available gas
volume for export gas calculation as below.)
Annual gas production profile was prepared from 2018 to 2037. Respective oil fields require their
own use of gas as fuel for power generation and gas turbine, etc. and it was excluded from the
available gas volume for export. (Same ratio as INES and GMP report)
3.3 Gas Composition of Associated Gas
As the associated gas composition of the target oil fields selected in Section 3.1, the data of the 2015
27
GMP report was used. It is considered that the associated gas in southern Iraq fields is heavier with
less methane component than the gas in northern Iraq fields. Each component production volume can
be calculated using this data and associated gas production volume.
Three gas groups, Dry gas (C1+C2), LPG (C3+C4) and NGL (C5 heavier), are defined in this study.
28
Summary and Basis of Facility Planning
“Gas Export Volume from Oil Fields” and “Required Capacity of Major Facilities” were decided based
on the study results of gas production volume calculation described in Section-3. Outputs of Facility
Planning described in this section were used as inputs for EPC Cost Estimate and Economic Study. The
study flow is shown below.
4.1 Gas Export Volume from Oil Fields
Gas export volume is critical inputs for economic study and EPC cost estimate. As the inputs to the
subsequent studies, the export gas volume was decided considering the backgrounds and reasons
described below
1) Total gas export volume is not to exceed the volume referring the communication
between Iraq and Kuwait until now.
2) In case of the field which is not owned by Iraq government at 100%, it is required
to make an agreement with other owners as a prerequisite condition.
3) Depending upon the associated gas compositions, in case of sour gas, acid gas
removal facilities are required and the cost for construction, operation and
maintenance is required accordingly. On the other hand for sweet gas, it is not
required.
4) It is assumed as ideal case in this study that NGL is completely separated at
Process Compressor & DPCU (Dew Point Control Unit) and only dry gas with
LPG mixture is exported to Kuwait. Separated NGL at Compression Station is
29
sent out to BGC. It is assumed in this study that the exported gas is separated to
dry gas and LPG at the existing facility in Kuwait and which is not included in this
study.
4.2 Capacity Planning for Major Facilities
4.2.1 Block Flow of Facilities
The facilities shown in Figure 4.4 below are required to process and export the gas described in
Section 4.1. With regard to the respective facilities, it is described in Section-5 Facility Planning.
Figure 4-1 Block flow for gas export
4.2.2 Material Balance
Material balance for selected milestone year was developed based on the gas export volume
obtained in Section-3.
DS :Degassing Station (Separator) GDU :Gas Dehydration Unit MT :MeteringCS :Compression Station DG :Dry Gas BC :Booster CompressorDPCU : Dew Point Control Unit AG :Associated Gas BGC :Basra Gas CompanyGSU :Gas Sweetening Unit
Fuel ② ③
①
Dry Gas + LPG⑤
④ NGL
Fuel ⑦ ⑧ ⑨ Reservoir or Sulfur RecoveryH2S/CO2
⑥
⑩ Dry Gas + LPG ⑱ ⑲ ⑳⑫
⑪ NGL
Fuel ⑭ ⑮
⑬
Dry Gas + LPG ㉑⑰
⑯ NGL ㉒ ㉓
CS, GDU,DPCUDS
Acid GasGDU & Re-
injection
GSUCS, GDU,
DPCUExport
Compressor
Met
erin
g
Met
erin
g
Kuw
ait
Bord
er
DS
CS, DP,DPCUDS BGC GPP
(KAZ/NR)& Export
Met
erin
g
30
4.2.3 Capacity Planning for Major Facilities
Capacity with the required timing of the major facilities which are required to process the gas volume
to be exported from the respective fields was studied and obtained.
31
Facility Planning
5.1 Facility Configuration
Scope of Facilities of this Pre-FS is broken down to the following two facilities from geographical and
functional points of view.
- Compression Station (CS)
- Gas Pipeline
There are tie-ins between Compression Station and Existing Degassing Station. Send-out gas from Iraq
is to be collected a Booster Station at Kuwait side. The concept is shown in Figure 5.1 Tie-in Concept
between Compression Station and Degassing Station.
Outline of the facilities which are to be installed in “Compression Station” and “Gas Pipeline” is
described in the following sections.
Figure 5-1 Tie-in Concept between Compression Station and Degassing Station
Scope of Degassing DS :Degassing Station (Separator) GDU :Gas Dehydration Unit MT :MeteringStation CS :Compression Station DG :Dry Gas BC :Booster Compressor(Existing) DPCU : Dew Point Control Unit AG :Associated Gas BGC :Basra Gas Company
GSU :Gas Sweetening UnitFuel ② ③
①
Dry Gas + LPG Scope of ⑤ Compression
Station (by SPC)
④ NGL
Fuel ⑦ ⑧ ⑨ Reservoir or Sulfur RecoveryH2S/CO2
⑥
⑩ Dry Gas + LPG ⑱ ⑲ ⑳⑫
⑪ NGLOut of Scope of Compression Station (by SPC)
Fuel ⑭ ⑮
⑬
Dry Gas + LPG ㉑⑰
⑯ NGL ㉒ ㉓
Met
erin
g
Kuw
ait
Bord
er
DS
CS, DP,DPCUDS BGC GPP
(KAZ/NR)& Export
Met
erin
g
CS, GDU,DPCUDS
Acid GasGDU & Re-
injection
GSUCS, GDU,
DPCUExport
Compressor
Met
erin
g
32
5.2 Compression Station
5.2.1 Compressors
The following compressors with series configuration will be installed to send out the associated gas
the pipeline.
Process Compressors (Reciprocating type): for pressurization
Export Compressors (Centrifugal type): for transfer large volume of gas
5.2.2 Gas Dehydration Unit (GDU)
GDU is installed downstream of the Process Compressor to remove water from the export gas for the
purpose of protection from condensation of water and possible corrosion inside the pipeline. Gas
saturated with water is passing through the absorbent (Typically TEG (Tri-ethylene Glycol) is used) and
water is absorbed in the absorbent. Absorbent contained water is regenerated by heating and recirculated.
Conceptual flow and specifications for each case of GDU are shown in Figure 5-2 below.
Figure 5-2 Conceptual flow of GDU
5.2.3 Dew Point Control Unit (DPCU)
DPCU will be installed downstream of Process Compressor. Compressed gas is cooled by refringent
agent and heavier gas component (NGL) will be separated. With provision of this DPCU, condensation
of heavier hydrocarbons and possible surging inside the pipeline will be avoided. Conceptual flow and
Specifications for each case of DPCU are shown in Figure 5-3 below.
33
Figure 5-3 Conceptual flow of DPCU
5.2.4 Gas Sweetening Unit (GSU)
Associated gas which contains acid gases (Sour gas) such as H2S and CO2 shall be removed before
exporting. Sour gas is passing through the absorbent (Typical amine solution is used) and acid gases are
absorbed in the absorbent. Absorbent contained acid gases is regenerated by heating and recirculated.
The recovered acid gas will be reinjected to the reservoir. Conceptual flow and specifications for each
case of DPCU are shown in Figure 5-4 below.
Figure 5-4 Conceptual flow of GSU
Dry gas +LPG
Raw gas
Refigerant NGL
DPCU
Sepa
rato
r
34
5.3 Gas Pipeline
The specification of the pipeline to connect the target oil fields and the booster station in Kuwait is
assumed as follows.
Material: Carbon steel
Laying method: Underground
5.4 Other Facilities
Gas metering unit for export gas will be installed at the downstream of Export Compressor. Metering
units for excess gas and NGL to BGC will be also installed. Other facilities such as SCADA, cathodic
protection system and pipeline pigging system will be installed.
5.5 Facilities Excluded for this Study
Facilities excluded for this study are as follows and not included in EPC cost estimate as well as
economics study.
1) Oil producing wells and wellhead, Gathering system and Degassing Station (DS) in
the oil fields.
2) Only GSU and no sulfur recovery unit was considered for acid gas treatments. It is
assumed that removed acid gas will be re-injected to the reservoir at the oil field
and the gas re-injection facilities are not included in this study as the scope of field
developer.
3) Gas pipeline from Kuwait border to the booster station in Kuwait and Gas
Separation Facilities.
5.6 EPC Cost of Facilities
Based on the capacity, specifications, size, etc. obtained through this study, EPC cost was estimated applying the appropriate cost estimate methodology from “Capacity Base Factoring”, “Unit Rate Estimate” and “Cost Item Base Factoring” depending upon the facility. Toyo inhouse data was used as the base cost.
The following basis of estimate was assumed for EPC cost estimate.
All the facilities are to be newly constructed. The new compression station is assumed to be installed at the next to the existing degassing station. The tie-in points are shown in this section as above. The required utilities are to be supplied from the existing degassing station.
35
Scope of Special Purpose Company is within Iraq boundary and the scope of EPC cost estimate is also within Iraq boundary.
It is assumed that the right of way of pipelines is to be managed under Iraq government responsibility and all the related costs are not included in this EPC cost estimate.
36
Economic Study and Proposal for Gas Price Setting Mechanism
6.1 Objectives of Project Economic Study
Objectives of this study are:
- To analyze the economics of this project which processes, pressurizes and exports to Kuwait the
associated gas being burned in southern Iraq at this moment.
- To propose the mechanism from neutral position how to set the gas price logically while it has
not been agreed between two countries, Iraq and Kuwait.
6.2 Scope of Study and Methodology
Scope of economic study of this project is shown in Figure 6-1.
Figure 6-1 Scope of Economic Study
Scope of economic study includes:
- Receiving the associated gases from various production wells.
- Processing the gases at the units such as dehydration unit, compression unit, dew point control
unit and sweetening unit.
- Sending out the gases through pipeline.
- Exporting the gases at the border between Iraq and Kuwait.
37
6.3 Methodology of Economical Study
This economical study was conducted using DCF method which are generally used for project economics, and IRR and NPV are calculated as indicators
Outline of this study approach is shown in Figure 6-2.
Figure 6-2 Approach of Economic Study
１） CAPEX was estimated by adding the costs to the EPC cost shown in Section 5.2. Process
Economics Program Review 2017-15 by HIS CHEMICAL was referred for CAPEX estimate.
Cost items to be added to EPC cost in general are:
・project definition cost
・Project development cost
・Government permitting cost
・Cost activities prior to FID
・Finance cost
２） The associated gas calculated in Section 4.1 was used as the feed gas. Current gas market
price was used as the feed gas gate price.
３） The product gas (C1～C4) calculated in Section 4.1 was used as the product gas. Current
C1/C2 price and C3/C4 price were used as product gate prices. C5+ fraction (NGL) is sent
out to BGC in Iraq. Current C5+ price was used as one of product gate prices.
４） OPEX includes the following cost items.
・Operator cost
・Maintenance worker cost
Gas pricingstudy
Sensitivityanalysis
CAPEX/OPEXestimation
GasProduction
PlanFacility Configuration
study
Facility Specificationdevelopment
Facility ResidualValue study
Material Balancecalculation
Feed and Productpricing
Revenue / Paymentestimation
IRR/NPVcalculation
38
・Factory overhead
・Utility purchasing cost
・Maintenance and repair cost
・General and administration expense
・Insurance premium
５） 2 years (2021 – 2022) as construction cost. 15 years (2023 – 2037) as production and export
period. IRR/NPV were calculated by IRR function and NPV function respectively which were
built into MS Excel.
６） Inflation and escalation were not considered. Production and export period is relatively shorter
comparing with the similar plant and the residual value was considered.
７） US EIA published prices shown in Table 6-1 were used as the gate price of feed gas and
product gas.
US Henry Hub price was taken as the gas price index since, due to shale gas development, USA has
become the world largest gas production country with leading role for gas trading market as the result.
Table 6-1 Feed/Product Price
Sample of Feed/Product price is shown in Figure 6-3, 4, 5 and 6 as below. As shown in Figure 6-3, the price per MMBTU is ranked from lowest to highest, C1/C2/C3/C4/NGL. Associated gas is composed of these gases as mixed gas. The price per MMBTU of rich gas is higher than lean gas in general because rich gas contains C2-C4 more than lean gas which major component is methane.
39
Figure 6-3 Spot Prices for Hydrocarbons (2002/01–2018/10)
Figure 6-4 NGL Price by Year
40
Figure 6-5 NGL Composite Price
Figure 6-6 CP Price Profile for LPG
(Source: http://www.ogcts.co.jp/service/lpg/pdf/lpgkakaku.pdf)
6.4 Study Result
Annual data of cost, sales, IRR and NPV were calculated based on the above section.
6.5 Sensitivity Analysis
IRR/NPV sensitivity analysis was conducted within the range of ±20% of price valuation of feed gas
and product gas.
41
6.6 Gas Price Consideration
As described in Section 6.5, Composition of associated gas is different in respective oil fields and
varies during the production period. For further study in this section, “Gas Export Price from Iraq”
versus “Gas Import Price to Kuwait” it is intended to use Composite Gas Price. Composite gas price is
calculated using the formula shown below.
“Composite Gas Price = Gas Composition x Heating Value / Total Gas Volume”
Heating value for each fraction is shown in Table 6-2 as below.
Table 6-2 Heating Value of Gaseous Fuel
Gas Heating Value (BTU/SCF)
C1 910
C2 1,630
C3 2,371
C4 2,977
C5 3,679
6.7 Proposal for Gas Price Setting
Based on the economic study results described as above, the gas price setting mechanism is proposed
according to the following two ways;
Way-1： Analyze the sensitivity of Product Gas Price with fixing Feed Gas Price
Way-2： Analyze the sensitivity of Feed Gas Price with fixing Product Gas Price
6.7.1 Fixing Feed Gas Price
Fixing Feed Gas Price as the price which is close to Product Gas (C1-4) Composite Price, Product
Gas Price was varied to analyze whether the price is acceptable by Kuwait side or not.
6.7.2 Fixing Product Gas Price
Fixing Product Gas Price as the price which is close to Product Gas (C1-4) Composite Price, Feed
Gas Price was varied to analyze whether the price is acceptable by Iraq side or not.
42
Project Implementation
7.1 Overall Project Roadmap
Overall project roadmap is shown as Figure 7-1 below.
Figure 7-1 Overall Project Roadmap
Based on this Pre-Feasibility Study results, the discussion with Iraq and Kuwait is to be made with
coordination by TOYO so that the basis and conditions of Feasibility Study will be developed which is the next step of this Pre-FS. Proper development of Feasibility Study with sufficient depth is heavily essential for realization of the project since the subsequent important activities such as Gas Supply Agreement, SPC and Financing are performed based on the results of Feasibility Study.
For Gas Supply Agreement, preliminary discussion will be made based on the results of Pre-FS.
However, deeper discussion will be made after completion of Feasibility Study toward signing. Establishment of SPC and financing arrangement will be performed based on the Feasibility Study
results as well and those are crucial matters prior to Final Investment Decision.
By forming the organization described in the next Section 7.2, EPC can be started immediately after FID. As the EPC period, 2 years is assumed for gas export commencement after that.
7.2 EPC Schedule
EPC schedule assumed at this moment is shown in Figure 7-2 below.
Activity1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H
Pre-FS
Discussion withIraq and Kuwait Continuous Discussion
FSPost FS
GSA
SPC/Financing
FIDEPC
Preparation Execution(Phase-1)Production
20232018 2019 2020 2021 2022
43
Figure 7-2 EPC Schedule
In order to start the EPC activities immediately after FID, the possible preparation activities (such as site survey, data collection, basis of design development, establishment of execution organization, etc.) are to be carried out during the above-mentioned schedule period (Feasibility study, Establishment of SPC, Financing arrangement, etc.)
For “Compression Station”, compressors relating activities are on the critical path of this schedule. It is required to make plan to give the priority for freezing the specifications and procurement activities. 24 months is assumed to be the project period.
For “Gas Pipeline”, the supplier is to be selected based on the specifications which is frozen immediately after commencement of EPC. The pipeline materials are to be delivered to the construction contractor for laying according to the construction plan. The pipeline EPC project period is assumed to be within 24 months considering the construction volume and pipeline route conditions.
No. ActivityQ(-2) Q(-1) Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8
0 FID1 Pipeline EPC
PreparationEngineeringProcurementConstruction
2 Compression Station EPCPreparationEngineeringProcurementConstruction
Year-1 Year-2Year-(-1)
44
CO2/SOx Reduction Impact Study
8.1 International Organization for CO2/SOx Reduction
For reduction of flare gas produced by burning associated gas, Iraq has participated in the following
international frameworks.
(1) United Nations Framework Convention on Climate Change (UNFCCC）
(2) Global Gas Flaring Reduction (GGFR)
8.1.1 Iraq Greenhouse Gas Reduction Target under UNFCCC
Iraq is one of the member countries of UNFCC and participated in Paris Agreement of COP21 in 2015.
With reference to the document which was submitted to COP21 in 2015 as reduction target of respective countries, the target of Iraq is to reduce greenhouse gases by 14% during 2020 and 2035. 14% of greenhouse gases in 2035 corresponds to 50 million tons of CO2 equivalent annually.
Effective utilization of associated gas is considered as one of the greenhouse gases reduction solutions.
On the other hands, it is described in the report which was submitted by Iraq to UNFCCC in 2017 as greenhouse reduction roadmap that the greenhouse gases in 1997 corresponds to 72 million tons annually of CO2 equivalent and 75% of that (54 million tons annually) is from the energy sector which includes flare gas at oil fields.
8.1.2 Iraq under GGFR
Iraq participates in Global Gas Flaring Reduction (GGFR) which was organized and established as
Private Public Partnership (PPP) by World Bank in 2015.
World Bank’s proposed GGFR initiative is (1) Oil companies to plan for zero routine flaring in new
oil field developments, (2) Routing flaring at existing oil fields to end as soon as possible and no later
than 2030.
According to GGFR report. it is assumed that flare gas volume which is not utilized as associated gas
during oil production in oil field is 140 billion cubic meters annually in the world.
Flare gas causes not only impact to climate change by CO2 emission but also health problems for
people surrounding oil fields due to significant atmospheric pollution by SOx, NOx and Black carbon
(Soot, PM2.5). Furthermore, black carbon from flare gas as the result of global atmospheric circulation
deposits on snow and ice cap causing melting. This issue is also major threat from climate change point
of view.
GGFR initiatives endorsers consist of ① Oil Companies, ② Governments, ③ Development
45
Institutions. Oil companies to provide appropriate investment and operation for oil fields. Governments
to provide legal/regulatory/investment/operating environment conducive to upstream investments and
energy infrastructure and market development. Development institutions to facilitate cooperation and
implementation and consider the use of financial instruments and other measures.
In case of Iraq, the government participates in GGFR.
According to the World Bank report in 2008, Iraq is flaring more than 180 million cubic meters of
associated gas each year; it is the second largest flaring country in the world after Russia. Iraq flaring
volume corresponds to significant part, 12.7%, of total volume in the world.
In case of Iraq, the flaring volume increased by 25%, from 13.3 billion in 2013 to 17.8 billion in 2017
cubic meters annually together with the oil production recovery. This situation is considered problematic
as a participant of GGFR.
Figure 8-1 Top 30 Flaring Countries in the World
(Quote: NCAA/GGFR)
On the other hands, Iraq is not leaving the above mentioned situation. Multiple positive progress and efforts were reported to GGFR. In the article published in November 2018 locally, the positive announcement of Iraq Oil Minister, Thamer al-Ghadhban, to deal with recovery with utilization of flare gas positively is included.
46
8.2 CO2/Sox Reduction Effects
Flare gas volume expected to be reduced by recovering the associated gas in this project was
calculated.
Comparing with the target of Iraq to reduce greenhouse gases by 14% between 2020 and 2035 which
corresponds to 50 million tons of CO2 equivalent annually, considerable contribution of this project was
observed as the study result.
As associated gas reduction effect under GGFR, comparing with the associated gas volume burned
in 2017 as flare gas, 18 billion cubic meters annually, considerable contribution of this project was also
observed as the study result.
In any case, this project is assumed to be one of key actions under Iraq’s international commitments
for reduction of greenhouse gases and to contribute considerably to reduction of greenhouse gases from
global point of view.
47
Study of Advantage and Benefit in Japanese Industry
9.1 Confirmation of Advantage of Japanese Industry
In order to realize this project, it is required for third party to be involved to enable to coordinate the
interest between Iraq and Kuwait.
It is also requested by both countries for Japanese company to be involved during the execution stage
as well since third party position is required in that stage to complete the project successfully. With this
involvement of Japanese company, it can be realized for both countries to get the great benefits through
this project.
Southern part of Iraq where this project is planned to be located is a key region of the country with
high population to produce oil and gas for supply domestically and internationally. However, security
issue caused by IS invasion resulted in economic deterioration with loss of employment situation in this
region. This situation is impacting to raise the cost of projects in which international companies
including Japanese companies are involved and which resulted in delay and suspension of the projects.
It is expected that the employment through this project can contribute to resolve the loss of employment
as well as security issues. It is expected that the improvement of presence of Japanese companies with
this project gives positive impact considerably to Japanese companies’ business in Iraq.
9.2 Applicable Japanese Technologies, Solutions and Those Advantage
9.2.1 Supply of Equipment, Materials and Solutions
Equipment, materials and solutions whose Japanese suppliers have considerable advantages are
described in this section as below.
Large Bore Pipe for Gas Pipeline
Steel pipe material manufactured by Japanese supplier conforms to NACE standard and has
sufficient qualification and track record of the product in the world. Especially for larger
diameter pipes in energy industry purpose has large production record and were installed for oil
and gas energy transportation project in the world. And safety assessment for the pipeline with
several simulations and destructive test of actual pipes can be conducted.
48
Rotating Machineries in Compression Station
Japanese products have considerable advantages for the rotating machineries to be installed for
pressurizing and sending out the gas from Iraq to Kuwait.
Those machineries are:
(1) Process Compressor (Reciprocating Type)
(2) Driver for Process Compressor (Induction Motor)
(3) Export Compressor (Centrifugal Type)
(4) Driver for Export Compressor (Gus Turbine)
（１） Process Compressor
Process Compressor is installed to pressurize the gas from Degassing Station up to the
pressure level which is appropriate for pipeline send out condition. Reciprocating type
compressor is selected for this service. There are worldwide reputable suppliers in Japan.
（２）Driver for Process Compressor
Induction motor is selected as the driver for Process Compressor. Japanese suppliers are
competitive in this service.
（３）Export Compressor
Export Compressor is installed to send out via pipeline the high pressure gas pressurized by
Process Compressor. Centrifugal type compressor is selected in order to send out mass volume
gas for long time stably. There are also worldwide reputable suppliers in Japan.
（４）Driver for Export Compressor
Heavy duty Gas Turbine is selected for the driver of Export Compressor. Japanese suppliers
are competitive in this service.
Supervisory Control And Data Acquisition System（SCADA:）
SCADA is collectively called for the facilities and software for supervisory control and data
acquisition of various industrial facilities and infrastructures including Oil & Gas pipelines.
SCADA consists of user interface, supervisory control computer system. Japanese suppliers are
strong in this service.
49
9.2.2 Profits through Commercialization
For commercialization of this project, it is planned to establish Special Purpose Company (SPC) who
undertakes the activities from planning until commercialization including construction, operation &
maintenance of pipeline and the associated facilities. Revenue of the SPC will be allocated from the toll
fee of sales gases transported through pipeline.
9.2.3 Stable Operation of Oil Field
Implementation of this project can contribute to stable operation of oil field which is producing
associated gas.
50
Proposal and Recommendation to Iraq Side・Way Forward
At the final workshop with Iraq side which was proposed however not held, the study results are to be
reported to Iraq side. Also, several proposals and recommendations for the implementation of the study
results are to be explained to and discussed with Iraq side for realization of this project.
(1) Approval of this Pre-Feasibility Study
(2) Update of Basis and Conditions of Feasibility Study
Basis and conditions of Feasibility Study are to be developed through the discussion with Iraq side.
① Technical Basis and Conditions
・Gas Source Oil Field
・Export Gas Volume
・Associated Gas Conditions(Composition, Pressure, etc.)
・Pipeline Route
② Commercial Basis and Conditions
・Funding Plan
・Labor Conditions
・Associated Gas Supply Conditions
・Product Gas Export Conditions
・Establishment of SPC
③ Environment and Social Considerations
・Rules and Regulation (Local and International)
(3) Establishment of Joint Working Group
In order to drive this project, close communication with Iraq side starting from update of basis and
conditions of Feasibility Study described above (1) is essentially required. It is required to establish the
51
execution organization at both sides. A joint working group as shown below was proposed.
<Iraq Side>
・Project Manager（Contact Person）
・In charge of Oil Field（Provision of field data and Discussion）
・In charge of Commercial Matters
<Japan Side>
・Project Manager Contact Person）
・In charge of Oil Field（Discussion on field data）
・In charge of Commercial Matters
(4) Way Forward for this Project
In order to move this project, it is firstly required to agree the short term schedule consisting of major
activities with required fund on annual basis.
52
Discussion with Iraq and Kuwait
11.1 Background before Study
Before starting the study, TOYO had a meeting with Iraq side to report the study was adopted by
METI and explain the overview and planned schedule of the study.
After the contract with METI effectuated, TOYO had a meeting with Iraq side twice as described
below.
11.2 First Meeting with Iraq side
Date: December 27th, 2018 12:30-13:30
Purpose: ・ To explain overview of the study to the Oil Minister ・ To request arrangement of workshop
Attendee: TOYO ・ Hiroshi Sato （Unit Director, Energy Business Unit） ・ Mirai Nakamura （Project Engineer）
Discussion: TOYO explained to Iraq side that TOYO is implementing the study with finance by
METI. TOYO requested determination of the person in charge for a workshop between
TOYO and Iraq side to discuss the study methodology, and was informed of the contact
of the person in charge.
11.3 Second Meeting with Iraq side (Workshop)
Date: January 23rd, 2019 12:30-13:30
Purpose: ・ To explain the study methodology, hear the opinion from Iraq side and confirm their approval on the study
Attendee: TOYO ・ Takeshi Mori （Senior Commercial Advisor） ・ Kohei Sakamoto （Senior Facility Engineer）
Discussion: TOYO explained the plan to examine feasibility from the third party perspective and
indicate reference figures to leads a breakthrough to the negotiation of gas price
between Iraq and Kuwait, as the gas export to Kuwait has economic and
environmental benefits for Iraq.
53
At the beginning, TOYO was planning to receive updated data for the study by Iraq
side, but had not received for months. Therefore TOYO expected difficulty in using
the updated data during this study and started the study based on the inhouse data
used for GMP in 2015. Iraq side acknowledged the necessity of more detailed
Feasibility Study as a next step using updated data. Iraq side agreed to prepare
updated data based on a list of necessary data prepared by TOYO and hold a Final
Review Meeting to report the study results in the end of February 2019.
11.4 Final Review Meeting
As agreed in the workshop, the Final Review Meeting was planned to be held in the end of February ,
but due to Iraq side internal approval procedure, the meeting has not been held yet, even though three
members of TOYO visited Iraq in the beginning of March 2019 upon getting the information on
possibility to have a meeting.
Final Review Meeting (not held yet)
Meanwhile, the Manager of TOYO Baghdad Branch had a meeting with Iraq side on March 7th, 2019,
and handed over the overview of the study result. At the same time, he explained the importance of the
next step, Feasibility Study.
Reporting the results to Kuwait is also necessary to proceed with the project. Due to personnel
changes in Kuwait state-owned companies during this study, timely report of the study outcome could
not be made for the Kuwait governments. TOYO made an appointment with KPC CEO in the beginning
of April 2019, and TOYO will discuss this study and way forward taking this opportunity.
Location: Ministry of Oil
Purpose: ・ To report the study results ・ To discuss the next steps
Attendee: TOYO ・ Takeshi Mori （Senior Commercial Advisor） ・ Kohei Sakamoto （Senior Facility Engineer） ・ Mirai Nakamura （Project Engineer）
Discussion: TOYO is planning to report the study results and present TOYO’s recommendation
mentioned in the Chapter 10 in this report.
（様式２）
Page Figure/Table No.17 Figure 2－117 Figure 2－219 Table 2－121 Figure 2－3
21 Figure 2－4
23 Figure 2－524 Figure 2－625 Figure 2－739 Figure 6－339 Figure 6－440 Figure 6－540 Figure 6－645 Figure 8－1
Block flow of existing LPG/NGL plants insouthern IraqIraq gas pipeline network (Dry gas)Iraq gas pipeline network (LPG)Iraq gas pipeline network (NGL)
Unapproved Item List for Secondary Use
Project：Project to Promote Overseas Salesof Quality Energy InfrastructureSystems in Fiscal Year 2018"Investigation of Possibility ofJapanese Technology Implementationin Oil / Gas Production Facilitiesin Iraq"
Title：Investigation Report (English)
Implemented by：Toyo Engineering Corporation
Monthly oil & gas production and flared gas
TitleOil & gas infrastructures in southern IraqOil & gas infrastructure in IraqIraq License rounds results
CP Price Profile for LPGTop 30 Flaring Countries in the World
NGL Composite Price
Spot Prices for Hydrocarbons (2002/01–2018/10)NGL Price by Year