Iraq in talks to lower plateau production rates at several oil fields

Baghdad (Platts)--14 Jun 2018 444 am EDT/844 GMT

Iraq is negotiating a potential reduction in long-term plateau production rates at fields awarded to international oil companies in the two bidding rounds in 2009, in a move that will bring Iraq's oil production capacity outlook down to more realistic levels.

Abdul Mahdy al-Ameedi, the director general of the oil ministry's Petroleum Contracts and Licensing Directorate, said the tweaks to production levels will be done via the new development plans agreed with the IOCs.

The fields being discussed are Zubair, operated by Italy's Eni, and the BP-operated Rumaila.

"So far in Zubair, there is an agreement to reduce the plateau production rate from 850,000 b/d to 750,000 b/d," he told S&P Global Platts this week. The field is currently producing around 450,000 b/d.

"In Rumaila, they are discussing reducing the production rate from 2.1 million b/d to maybe 1.8 million b/d," Ameedi said. Rumaila is producing 1.45 million b/d.

But Ameedi added that "there is nothing final," and none of the plans have been approved yet.

The Garraf oil field, awarded in the second bidding round to Malaysia's Petronas, will remain at the contracted 230,000 b/d production rate, he said.

West Qurna 1, operated by ExxonMobil, and the Missan oil fields operated by the China National Offshore Oil Corp., are also being discussed for plateau reductions, Ameedi said, though he wouldn't provide hard numbers.

Under Iraq's 2009 bid rounds, fields were awarded to international oil companies on the basis of a per barrel remuneration fee, and plateau production targets. Critics of the bid rounds said the plateau production targets led to IOCs promising unrealistic targets for fields.

In a sign of realism, Iraq's deputy minister for upstream and director general of the Basra Oil Company said in Houston in early May that the country is targeting 8 million b/d production capacity by 2025. This is down from the more than 13 million b/d production capacity had all bidding round contracts maintained original targets and development stayed on track.

Development of these fields has generally lagged original plans due to a host of factors including falling oil prices, non-payment by the government to contractors, delays to work program and project approvals and lack of infrastructure.


Ameedi said the ministry will attempt to push through approvals of the April 26 fifth bidding round contracts before the next Parliament is sat. The six contracts for exploration areas on Iraq's borders with Iran and Kuwait have been initialed by the ministry and companies, but require Cabinet approval before final signing.

With results of the May 12 election in a limbo, however, it's unclear exactly when the current government's authority will expire and whether the next government will be as IOC-friendly. Technically, the parliament's authority ends July 1, making the government a caretaker.

"Next week, we will refer a letter from the Ministry of Oil to the Committee of Energy Affairs in the Cabinet, requesting the approval of the Cabinet on the awarded contracts," he said. "So, I hope we will have time."

Another contract requiring government continuity is a multi-billion dollar infrastructure-field development project in southern Iraq with ExxonMobil and PetroChina. It would leverage revenues from developing two currently state-operated fields to pay for water injection pipeline systems, feeder lines, export lines, and pumping stations, among other projects necessary to debottleneck and expand production capacity in southern Iraq.

The project has been under negotiation since 2015.

"The only issue remaining is commercial," Ameedi said, adding that the ministry has told ExxonMobil the maximum profit sharing it would agree to. "Next week we will have a meeting with them, and we will see if they will tell us their position or not, and we will set a deadline for the negotiation with them."


--Edited by Geetha Narayanasamy,

Copyright © 2018 S&P Global Platts, a division of S&P Global. All rights reserved.