Iraq’s state-run South Oil Company has signed a $15bn technical service contract with the UK’s BP and its partner on the project, China National Petroleum Corporation (CNPC), to develop the Rumaila oil field, following cabinet approval.
BP and CNPC plan to invest $15bn over the 20-year duration of the contract.
During the duration of the contract, production should increase from 1 million barrels a day (b/d) in 2009 to 2.9 million b/d by 2020, potentially making Rumaila the world’s second-largest oil field after Saudi Arabia’s Ghawar field.
Rumaila, in the south, is the only oil field from Iraq’s first post-war licensing round in June 2009 that the state has officially awarded to a consortium of international oil companies.
During the June bid round, the Iraqi government forced BP and CNPC to almost half their income from oil production from $3.99 a barrel to $2 a barrel (MEED 30:6:09)
BP says the government will pay $2 a barrel once its consortium has increased the level of production by 10 per cent to 1.1 million b/d.
The UK oil major holds a 38 per cent stake in the consortium, CNPC has a 37 per cent share and Iraq’s State Oil Marketing Organisation owns 25 per cent.
The consortium, called the Rumaila Field Operating Organisation, will manage the rehabilitation and expansion project. South Oil Company will provide the bulk of the staff as well as technical experts and managers from BP and CNPC.
BP provided technical assistance to Iraq’s Oil Ministry on the Rumaila field from 2005-07. It says it expects to boost oil production by initially focusing on water flooding and gas reinjection techniques.
On 2 November, Iraq’s Oil Ministry signed a 20-year deal with a consortium led by Italy’s Eni to develop the southern Zubair field near Basra (MEED 2:11:09). However, the licence still requires cabinet approval.