Iraq’s crude oil exports rose to just over 2 million barrels a day (b/d) in February, up 7 per cent from 1.93 million b/d in January, according to data from the State Oil Marketing Organisation (Somo).
At the same time, the US’ ExxonMobil and its partner UK/Dutch Shell have negotiated a lower baseline production level from the oil ministry for the West Qurna-1 field.
The baseline is the level at which the field is producing, based on oil ministry estimates, without any international oil company (IOC) involvement. Revisions have subsequently been made, following the IOC’s surveys of the reservoirs and production facilities.
The baseline for the West Qurna-1 field dropped from the initial assessment of 279,000 b/d to 244,000 b/d. The Italian Eni-led consortium also secured a reduction at the Zubair field of 183,000 b/d, down from 195,000 b/d.
In the short term, the lower baseline will mean the IOCs are paid slightly more than previously expected. ExxonMobil agreed a remuneration fee of $1.9 a barrel over the baseline. Meanwhile Eni secured $2 a barrel.
The move shows that initial Iraqi estimates may have been too optimistic in their assessment of potential reservoir damage, according to Samuel Ciszuk, analyst at IHS Global Insight.
“If reservoir damage is involved, it might of course also affect peak performance and this would have a negative impact on the companies remuneration.”
The revised numbers show that production infrastructure and facilities are in worse shape than Iraq had estimated, says Ciszuk. “And also that the Iraqi monitoring and metering equipment, measuring the output, leaves a lot to be desired”.
The IOCs are now under pressure to demonstrate their progress in developing the fields, within three months of signing.
Some companies are moving ahead. The UK’s BP and China National Petroleum Company have already awarded a $318m drilling contract to drill 45 wells at the 17-billion-barrel Rumaila to Turkish Petroleum International Company (TPIC). State-owned South Oil Company is yet to make a decision on a tender to drill a further 56 wells.
Any real investment will have to wait for the outcome of elections on 7 March.