IRAQ: British oil giants BP and China's CNPC sign deal to develop Iraq's biggest oil field

Record ID: 343671

  • Title: IRAQ: British oil giants BP and China's CNPC sign deal to develop Iraq's biggest oil field
  • Date: 4th November 2009
  • Summary: BAGHDAD, IRAQ (NOVEMBER 3, 2009) (REUTERS) IRAQI OIL MINISTER HUSSEIN AL-SHAHRISTANI AND REPRESENTATIVES OF BP AND CHINA'S CNPC DURING SIGNING CEREMONY REPRESENTATIVES OF BP AND CHINA'S CNPC SIGNING CONTRACT SHAHRISTANI AND REPRESENTATIVES OF BP AND CHINA'S CNPC APPLAUD SHAHRISTANI BEHIND PODIUM (SOUNDBITE) (Arabic) HUSSEIN AL-SHAHRISTANI, IRAQI OIL MINISTER, SAYING:
  • Embargoed: 19th November 2009 12:00
  • Keywords:
  • Location: Iraq
  • Country: Iraq
  • Topics: Information,Energy
  • Reuters ID: LVAQOZF3IP946Z8BC4B6XHHSVAU
  • Story Text: British oil giants BP and China's CNPC sign a major 20-year contract with Iraq to take oil from the Rumaila oil field.
    British oil company BP and China's CNPC on Tuesday (November 3) signed Iraq's first major new oil deal since the 2003 U.S. invasion, snapping up a development contract for the Rumaila oilfield, one of the world's biggest.
    The 20-year contract for the southern oilfield is the first of several deals that Iraq expects to sign in the coming weeks and months as it tries to catapult itself to third place from 11th in the league of oil-producing nations.
    The deals face huge political risk. There is no guarantee the next government following an election in January will honour them, and Iraq is still wracked by political violence and bomb attacks by Sunni Islamist insurgents, such as al Qaeda.
    As Iraq emerges from the sectarian carnage unleashed by the invasion, foreign capital and expertise is crucial to reviving the oil sector and raising the billions needed to rebuild.
    The country holds the world's third largest crude reserves but has failed to ramp up production significantly after decades of war, sanctions and underinvestment.
    "With these contracts, Iraq has started a new phase. In the past, Iraq's oil was used to finance the Iraqi war machine that killed Iraqis, attack neighbouring countries and waste the fortune. The oil was a source of harm to Iraqis and a burden on their life. The oil ministry has taken significant steps to bring in investors to this important contract. This income will be used to finance reconstruction in Iraq and improve the standard of living for Iraqis." said Oil Minister Hussain al-Shahristani said.
    Rumaila, with 17 billion barrels in estimated crude reserves, is the workhorse of Iraq's oil industry, producing almost half its total output of 2.5 million barrels per day. The field's reserves alone are bigger than Algeria's.
    BP and its Chinese partner expect to increase Rumaila's output to 2.85 million barrels per day.
    BP's chief executive, Tony Hayward, said they would invest 15 billion U.S. dollars.
    "We're looking forward to working with our partners, CNPC and the Southern Oil Company, to take production in Rumaila from around one million barrels a day to 2.8 million barrels a day. And over the lifetime of the contract, we expect to invest around 15 billion dollars. It's a very significant undertaking for BP and we're very pleased to be here and participating," he said.
    Iraqi oil experts say they don't expect BP and CNPC to pump billions into Rumaila immediately, partly because of uncertainty over the outcome of parliamentary elections in January.
    The contract allows them to start slow -- they must spend 300 million dollars over the first 33 months and ramp up production by 10 percent initially.
    Rumaila was the only one out of six oilfields and two gas fields on offer that was successfully auctioned off in Iraq's first tender of development contracts at the end of June. Other oil companies balked at Iraq's stiff terms.
    But subsequent negotiations behind closed doors and the sweetening by Iraq of its taxation terms have since narrowed the differences between the oil ministry and the companies and several other contracts are expected to be finalised soon.
    Among them is the 4-billion-barrel Zubair oilfield in the south. Italy's Eni, U.S. major Occidental Petroleum Corp and South Korea's KOGAS inked an initial deal over Zubair on Monday.
    Another is the 9-billion-barrel West Qurna oilfield, and Iraq is also talking to Royal Dutch Shell about resubmitting a bid for the Kirkuk oilfield in the north.
    The Rumaila, Zubair and West Qurna deals alone are expected to add 4.5 million barrels per day to Iraq's oil output capacity, roughly equal to 5 percent of global oil supply.
    A second auction of 10 largely undeveloped oilfields will be held on Dec 11-12.
    In addition, Iraq is expected to sign a different kind of deal with Japan's Nippon Oil Corp for Nassiriya.
    The deals bodes well for Iraq's second round of tenders.
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