Post on 04-Jun-2018
transcript
Always moving forward
Investments in Iraq: Decision Point
Gati Al-Jebouri
LUKOIL Vice President
1
LUKOIL AT A GLANCE
Azerbaijan
Belarus
Belgium
Bulgaria
Egypt
Finland
Ghana
Georgia
Italy
Iraq
Kazakhstan
Luxemburg
Macedonia
Mexico
Moldova
Montenegro
Netherlands
Norway
Nigeria
Croatia
Romania
Russia
Cameroon
Serbia
Spain
Turkey
Ukraine
USA
Uzbekistan
Exploration Production Oil refining Gas processing Petrochemicals Power generation Petrol stations Shipment
LUKOIL operates in more then 30 countries of the world
Full Energy Cycle
Exploration
Production
Oil Refining
Petrochemicals
Transportation Sales
«Green» energy
Power generation
Gas processing
2.2 Mboepd
1.3 Mbpd
1.1 mln ton
5,000 stations
6 GW
16 bln BOE proved reserves
LUKOIL in IOCs’ ratings: № 6 in energy sector (Platt’s 250) № 10 among oil & gas companies (The Forbes 2000) № 11 among private oil companies (Fortune Global-500)
LUKOIL in Russia:
15% of oil production 15% of oil refining 12% of proven oil reserves
LUKOIL in the world:
2% of oil production 2% of oil refining 1% of proven oil reserves
LUKOIL in Iraq:
№ 1 in production added № 2 in investments № 2 in oil reserves (p+p)
2
LUKOIL PROJECTS IN IRAQ
West Qurna-2
DPSC
Effective date
Jan
2010
West Qurna-2
LUKOIL acquires Statoil’s interest in the project and
raises its stake to 75%
May
2012
March
2014
West Qurna-2
Start of production First Plateau –
120 kbopd
June
2015
West Qurna-2
Phase 1 Target Plateau –
400 kbopd
Block 10
EDPSC Effective date
Feb
2017
Block 10
Commercial discovery made after drilling the first exploratory well
Block 10
Start of 2D seismic survey works
Aug
2016
Block 10
Start of exploratory drilling
Dec
2012
Jan
2014
3
WEST QURNA-2: GENERAL INFORMATION*
Total CAPEX – 38 bln USD
Total costs up to date: USD 7.5 bln USD
Iraq’s revenue up to date: 10.4 bln USD
9% of Iraqi oil production and 22% of Iraqi oil export in 2016
Highest incremental production growth in Iraq (400 kbpd)
10,000 workers** of Iraqi origin in LUKOIL and contractor organizations
* As of 31.12.2016 ** At the peak of construction
4
ERIDU: GENERAL INFORMATION
Iraq’s biggest oil discovery over the last 20 years with daily flow rate of more than 1,000 cubic meters of sweet oil from Mishrif horizon
The first exploratory well drilled to the depth of 3,168 meters was a success
No previous exploration drilling on the Block 10 territory of 5,665 sq.km
2,022 km of 2D seismic acquisition over 2013-2015
200 jobs created for local workers during seismic acquisition and 60 more during exploratory drilling
5
OIL PRODUCTION IN SOUTHERN IRAQ BY FIELDS
Source: Wood Mackenzie, LUKOIL
Two thirds of Iraqi oil production in 2016 came from seven oilfields operated by IOCs 2016 Iraqi production: 4.6 Mbpd Big Seven production: 3.1 Mbpd
Oil production, Mbpd
Basra
Baghdad
Badra 0.07
Halfaya 0.2
Majnoon
0.2
Az Zubair
0.4
West Qurna-2 0.4
West Qurna-1 0.4
Rumaila South
Rumaila North 1.4
6
SOUTHERN IRAQ EXPORT CAPACITY
0
1
2
3
4
2010 2017
Production Export capacity
Realization of Iraq Crude Oil Export Expansion Project (ICOEEP) allowed to expand Southern Iraq’s export capacity from 1.75 Mbpd to 3.75 Mbpd by 2017
Oil Production vs Export Capacity, Mbpd
SPM 1,2,3 ABOT KAAOT
Export Capacity, Mbpd
3.75
Source: Wood Mackenzie, LUKOIL
7
2017 BUDGETS VS PRODUCTION BY FIELDS
0
0.2
0.4
0.6
0.8
1
1.2
1.4
0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2
OPEX, bln
USD
CAPEX, bln USD
Companies will invest in maintaining current level of production in 2017
Source: Wood Mackenzie, LUKOIL
Rumaila $2.9 bln
1.4 Mbpd
5.8 $/bbl
Total costs bln USD
Oil Production Mbpd
Oil Field
Total costs, $/bbl
Zubair $1.7 bln
0.4 Mbpd
12.4 $/bbl
WQ-1 $1.3 bln 0.4 Mbpd
8.3 $/bbl
WQ-2 $0.8 bln
0.4 Mbpd
5.5 $/bbl
Majnoon $1.0 bln
0.2 Mbpd
11.8
Halfaya $0.9 bln
0.2 Mbpd
12.3 $/bbl
Badra $0.4 bln
0.07 Mbpd
16.9 $/bbl
8
FUTURE INVESTMENT REQUIREMENTS
$124 bln
Rumaila
$26.4 bln
WQ-1
$18.8 bln
Zubair
$20.0 bln
WQ-2
$32.8 bln
Majnoon
$14.3 bln
Halfaya
$10.1 bln
Badra
$1.5 bln
Investment Plans for South Iraqi Oil Fields from 2017 onwards
The key bottleneck for the Iraqi oil industry is a shortage of water resources for injection.
In 2010-2013, the Common Seawater Supply Project (CSSP) with the cost of over $10 bln was designed to solve the issue. But the problem is still in place.
At the moment, most of the companies have reached zero or positive cumulative cash flows and are in a position to decide on future investments.
Future investments are highly dependent on revised schedules, timely cost recovery, IRR levels and TSC conditions.
Source: Wood Mackenzie, LUKOIL
9
REMUNERATION* OF IOC IN 2017-2034
0
0.1
0.2
0.3
6 8 10 12 14 16 18 20
Rem
unera
tion o
f IO
C /
Ira
qi Revenue,
2017-2
034, %
Remuneration of IOC / CAPEX, 2017-2034, %
Source: Wood Mackenzie, LUKOIL
* Share of IOC after deduction of taxes, P-factor and non-refundable costs are not applied
Remuneration CAPEX Oil Field
Remuneration, $ bln
Remuneration Iraqi Revenue
X 100%
X 100%
Zubair 16%
0.1%
$3.2 bln
WQ-1 13%
0.1%
WQ-2 10%
0.1%
$3.3 bln
Majnoon 8%
0.04%
$1.2
bln Halfaya 13%
0.04%
$1.1 bln
$2.5 bln
Rumaila 34%
0.3%
$9.0 bln
Badra 75%
0.04% $1.1 bln
34 76
10
HOW TO BOOST IRAQ’S INVESTMENT POTENTIAL
As per the TSC conditions, IOCs’ remuneration (after deduction of taxes, excluding P-factor and non-refundable costs) amounts to less than 1% of the total Iraqi oil revenues, which is equivalent to 21.4 bln USD (3.3 bln USD for WQ-2) over 2017-2034.
Due to unfavorable macroeconomic conditions 2014-2016, the majority of investment projects in Iraq demonstrates now Internal Rate of Return (IRR) of only 3-5%
Low IRR negatively affects Iraqi competitiveness among oil producing countries looking to attract foreign investments
To attract more investments and achieve higher oil production growth, it’s essential to: adhere to TSC in terms of costs reimbursement working together with IOC in order to increase projects’ IRR taking into account
interests of both parties
Other important requirements are: strict adherence to the approved work schedule, cost effective production, mutually beneficial employment policy, cooperation with local contractors and population
11
4
5
6
7
8
9
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
High Investment Scenario Fast growth - Iraq Ministry of Oil
FORECAST OF IRAQ’S OIL PRODUCTION
Medium Investment Scenario Limited Growth - Wood Mackenzie
Low Investment Scenario Maintaining current production level
Oil
Pro
duct
ion,
Mbpd
Always moving forward