Talks between US-based ExxonMobil and Iraq on the planned $13bn Common Seawater Supply Project (CSSP) have broken down, increasing uncertainty about the country’s plans to increase crude production.

The impasse centres on contract terms and costs, according to a Reuters report that cites anonymous industry sources.

The CSSP is a key part of the government’s long-term strategy to increase crude production in the south of the country.

It will provide the operators with water to inject into the reservoirs to increase pressure and boost recovery, with targeted recovery rates of 50 per cent. It will also free up fresh water for use by the local population.

Under the original plans, the CSSP was due to have the capacity to deliver 12.5 million barrels a day (b/d) of seawater through 426km of pipeline, including eight interconnecting stations and 10 delivery stations.

More recently, officials have talked about the project having a capacity of 5 million b/d and being delivered in two stages.

Earlier this year, an invitation to bid on the project was issued.

This month, the director general of the state-run Basrah Oil Company, Ihsan Abduljabbar Ismaael, told reporters that five international companies were competing to win the project.

The CSSP has suffered several setbacks since it was first conceived.

Originally led by ExxonMobil, responsibility for the project was transferred to US-based CH2M in a $170m deal in late 2012.

A front-end engineering and design (feed) study on the pipelines to transport the seawater to oil fields was carried out by Austria’s ILF Consulting Engineers, with the group announcing the contract from South Oil Company in December 2014.

Separate feed studies were completed in 2016 by US-based Parsons. These concerned water intake and outfall structures, a shipping channel, offloading facility, seawater treatment facility, and a gas turbine power plant.

Since then the project has stalled.

ExxonMobil and China National Petroleum Corporation have been in discussions with Iraq for more than two years over projects that include the CSSP.