SNC-Lavalin wins project support services contract for Iraqi oil field

12 September 2018 3 min. read
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Montreal-based design and engineering consultancy SNC-Lavalin was recently awarded a project support services contract by Lukoil in Iraq. The Russian energy firm has a 75% stake in the West Qurna phase 2 oil field, one of Iraq’s largest proven reserves.

Iraq is one of the biggest oil producers in the world, with an average production of 4,463,000 barrels per day (of which it exports 4 million daily). The country has the fifth-largest proven oil reserves at 144 billion barrels – representing about 18% of Middle East reserves and almost 9% of global reserves. The UN estimates that 99% of the troubled state’s revenues come from oil.

In the 1970s, Iraq pumped out 3.5 million barrels per day, but its invasion of Kuwait brought down heavy sanctions that barred oil exports until 1996. In the year after the 1991 invasion of Kuwait, Iraq’s oil output fell by 85%. Even after 1996, oil could only be exported out of Iraq in exchange for humanitarian aid, in the UN’s oil-for-food program.

Following the 2003 US invasion of Iraq, planners figured the country could be rebuilt with oil revenues. Sanctions were lifted and international oil firms entered the country, re-developing Iraq’s oil fields and expanding production. What followed were years of civil war and sectarian violence, capped by the emergence of ISIS – which was finally crushed last year. Meanwhile, an estimated 500,000 Iraqi civilians have been killed since 2003, and the country ravaged by years of war.SNC-Lavalin wins project support services contract for Iraqi oil fieldCurrently, the Iraqi government is wrangling with the autonomous Kurdistan Regional Government (KRG) over the oil produced in northern Iraq. Oil fields in the KRG’s control produce about 15% of Iraqi oil, and the KRG has been selling most of it on its own, over the objections of the Baghdad government which wants to export and market all oil in the country.

Meanwhile, international firms continue to bring their expertise into the oil and gas sector in Iraq. The West Qurna oil field, 65 km northwest of Basra, is one of Iraq’s largest and is believed to hold about 43 billion barrels of recoverable reserves. Phase 1 of the field is currently being run by a joint venture of US Exxon and Dutch Shell. Meanwhile, Russian energy firm Lukoil has a 75% stake of phase 2 of West Qurna (the Iraqi state oil firm owns the remaining quarter). Lukoil receives $1.15 per barrel produced at the field.

Lukoil Mid-East has now awarded engineering and design consultancy SNC-Lavalin a framework agreement for project support services on the West Qurna phase 2 oil field. The consultancy will be tasked with providing Lukoil with engineering, design, and project support services for the development of the Mishrif and Yamama formations of the oil field, as well as professional development of local workers. Required surface facilities will include well pads, flowlines, a central processing facility, export pipelines, and storage tanks, among other elements.

"We continue to build on our long-term relationship with LUKOIL and to help them realize their projects successfully. Once again, we look forward to demonstrating our expertise in the delivery of professional services and our enviable reputation that has been earned in the region for over 50 years," commented Christian Brown, President, Oil & Gas, SNC-Lavalin. "We are well established in the Middle East and have worked closely with national and international oil companies and Iraq's Ministry of Oil on projects across the value chain, ranging from professional services to engineering and delivery of some of the world's most complex projects."