12 months ago
Engineers walking in a Basra oil field. REUTERS
BASRA — Iraq has approached PetroChina and ExxonMobil to invest in a multi-billion-dollar oil project in order to boost output from its southern oilfields.
State-run South Oil Co. (SOC) is seeking investment from either or both of the companies to build infrastructure needed to raise output at the smaller southern fields it operates, said SOC Deputy Chairman Basim Abdul Kareem.
"It is the 'Integrated South Project.’ A committee from the Ministry of Oil together with SOC are discussing it with international contractors ExxonMobil and PetroChina and it is currently under negotiation," Kareem said.
The 'Integrated South Project' consists of building oil pipelines, storage facilities and a seawater supply project to inject water from the Gulf to maintain pressure and enhance oil recovery, Kareem added.
The enhanced recovery project targets the Luhais, Nassiriya, Tuba, Nahr Bin Umar and Artawi oilfields, he said.
They are producing about 240,000 barrels per day (bpd) currently and SOC's initial plan calls for raising that to about 350,000 bpd in 2016.
"We reached a point where we should develop the recovery oilfields just like the other oilfields, and you know Iraq today, demands increase in financial resources and that's done by increasing production and exporting operations and we want to reach a new way of dealing with the contractors, the change of oil prices made us aware of this situation and put these fields in procedure," Kareem said
According to Kareem, a sharp fall in crude oil prices since mid-2014 has hurt Baghdad's ability to fund oilfield development and foreign investments are needed.
"The current situation and the financial capabilities of the country need funders and projects on credit. In addition to many other things, we are studying these things technically, what's currently there on the fields and the future projects. After the technical discussion there will be further discussions about the contracts and the financing," he said.
PetroChina has shown more interest than Exxon in the project, a SOC official said, declining to be identified.
The two companies were approached because they are developing the West Qurna phase 1 oilfield that needs water injection to halt a decline in production, said the official.
Oil sales generate 95 percent of Iraq's revenue and a price fall to less than $40 per barrel from $115 in mid-2014 has hit hard.
The seawater project will also be used to overcome declining production rates at larger fields such as West Qurna and Majnoon, operated by oil majors such as BP, Royal Dutch Shell, Eni and Lukoil.
"The project of sea water is very important it will support the fields that were awarded in bidding rounds by supplying water to improve its recovery and increase output, like Zubair oilfield, West Qurna 1 and 2, in addition to Misan and Naseriya oilfields, that's why it needs large amounts of water," said Kareem.
Iraq's production stagnated for years due to wars and sanctions but started to rise in 2010 after Baghdad secured service contracts with companies including BP Plc, ExxonMobil, Eni and Royal Dutch Shell.