Investments in Iraq: Decision Point

Transcription

1 Always moving forward Investments in Iraq: Decision Point Gati Al-Jebouri LUKOIL Vice President

2 LUKOIL AT A GLANCE Full Energy Cycle 16 BOE proved reserves Exploration 2.2 Mboepd 6 GW Gas processing Production 1.3 Mbpd LUKOIL operates in more then 30 countries of the world Power generation Oil Refining Azerbaijan Belarus Belgium USA Egypt Finland Kazakhstan Mexico Moldova Montenegro Netherlands Norway Cameroon Serbia Spain 1.1 mln ton Bulgaria Ghana Georgia Luxemburg Macedonia Nigeria Croatia Turkey Ukraine «Green» energy Petrochemicals Italy Iraq Romania Russia Uzbekistan 5,000 stations Sales Transportation Exploration Production Oil refining Gas processing Petrochemicals Power generation Petrol stations Shipment 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 the world: 2% of oil production 2% of oil refining 1% of proven oil reserves LUKOIL in Russia: 15% of oil production 15% of oil refining 12% of proven oil reserves LUKOIL in Iraq: 1 in production added 2 in investments 2 in oil reserves (p+p) 1

3 LUKOIL PROJECTS IN IRAQ West Qurna-2 Block 10 West Qurna-2 West Qurna-2 Block 10 DPSC Effective date EDPSC Effective date Start of production First Plateau 120 kbopd Phase 1 Target Plateau 400 kbopd Commercial discovery made after drilling the first exploratory well Jan 2010 May 2012 Dec 2012 Jan 2014 March 2014 June 2015 Aug 2016 Feb 2017 West Qurna-2 Block 10 Block 10 LUKOIL acquires Statoil s interest in the project and raises its stake to 75% Start of 2D seismic survey works Start of exploratory drilling 2

4 WEST QURNA-2: GENERAL INFORMATION* Total CAPEX 38 USD Total costs up to date: USD 7.5 USD Iraq s revenue up to date: 10.4 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 ** At the peak of construction 3

5 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 jobs created for local workers during seismic acquisition and 60 more during exploratory drilling 4

6 OIL PRODUCTION IN SOUTHERN IRAQ BY FIELDS Baghdad Oil production, Mbpd 0.07 Badra 0.2 Halfaya Two thirds of Iraqi oil production in 2016 came from seven oilfields operated by IOCs West Qurna-1 West Qurna-2 Rumaila North 0.2 Majnoon Basra 2016 Iraqi production: 4.6 Mbpd Rumaila South Az Zubair Big Seven production: 3.1 Mbpd 0.4 Source: Wood Mackenzie, LUKOIL 5

7 SOUTHERN IRAQ EXPORT CAPACITY Export Capacity, Mbpd 3.75 SPM 1,2,3 ABOT KAAOT Oil Production vs Export Capacity, Mbpd 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 Production Export capacity Source: Wood Mackenzie, LUKOIL 6

8 OPEX, USD 2017 BUDGETS VS PRODUCTION BY FIELDS 1.4 Companies will invest in maintaining current level of production in 2017 $2.9 Rumaila 1.4 Mbpd $ Mbpd WQ-2 $ Mbpd 5.5 Badra 16.9 $1.3 WQ Mbpd Majnoon $ Mbpd Halfaya $ Mbpd Zubair $ Mbpd Total costs USD Oil Production Mbpd Oil Field Total costs, CAPEX, USD Source: Wood Mackenzie, LUKOIL 7

9 FUTURE INVESTMENT REQUIREMENTS Majnoon $14.3 Investment Plans for South Iraqi Oil Fields from 2017 onwards Halfaya $10.1 Badra $1.5 $124 Rumaila $26.4 WQ-1 $18.8 The key bottleneck for the Iraqi oil industry is a shortage of water resources for injection. In , the Common Seawater Supply Project (CSSP) with the cost of over $10 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. WQ-2 $32.8 Zubair $20.0 Future investments are highly dependent on revised schedules, timely cost recovery, IRR levels and TSC conditions. Source: Wood Mackenzie, LUKOIL 8

10 Remuneration of IOC / Iraqi Revenue, , % REMUNERATION* OF IOC IN * Share of IOC after deduction of taxes, P-factor and non-refundable costs are not applied 34% 0.3% Rumaila 0.3 Remuneration CAPEX X 100% Oil Field $9.0 Remuneration Iraqi Revenue X 100% Remuneration, $ % 0.1% WQ-2 $3.3 $2.5 WQ-1 13% 0.1% $3.2 Zubair 16% 0.1% 0 8% Majnoon 0.04% $1.2 $1.1 Halfaya 13% 0.04% 75% Badra 0.04% $1.1 Remuneration of IOC / CAPEX, , % Source: Wood Mackenzie, LUKOIL 9

11 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 USD (3.3 USD for WQ-2) over Due to unfavorable macroeconomic conditions , 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 10

12 Oil Production, Mbpd FORECAST OF IRAQ S OIL PRODUCTION 9 High Investment Scenario Fast growth - Iraq Ministry of Oil 8 Medium Investment Scenario Limited Growth - Wood Mackenzie Low Investment Scenario Maintaining current production level

13 Always moving forward