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KBR, Anton Oil to win management contracts at Iraq's Majnoon oil field: sources

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KBR, Anton Oil to win management contracts at Iraq's Majnoon oil field: sources


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The Iraqi oil ministry is set to award two management contracts to replace Shell at the Majnoon oil field, senior industry officials told S&P Global Platts.

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Basra Oil Company, the state-run firm that owns the field, has opted to operate the field instead of replacing Shell, and junior partner Petronas, which announced last year it was relinquishing its 2010 technical service contract.

In order to maintain output and continue development of the field, KBR will play a project management consultant role and Anton Oil will handle production operations and management, a senior industry official said.

The pair will get separate two-year contracts, to be signed "in the few upcoming days," the official said, with work under the contract beginning in April.

Shell is expected to complete its exit from Majnoon by the end of June, though that date could be accelerated to the end of May, a second official said.

Multiple ministry officials have said it is still considering bringing in an international oil company in the same caliber as Shell to develop the field. Chevron, Total and BP were all named last November by oil minister Jabbar al-Luaibi as having expressed interest in replacing Shell.

One stumbling block, however, is the same reason that Shell left the field: negotiations to reduce production targets and realign financial parameters, let alone renegotiate the contract.

Majnoon is producing between 220,000 b/d and 235,000 b/d currently, a senior industry official said.

In December, Luaibi said Basra Oil Company plans to add 200,000 b/d to production at Majnoon within two years.

Shell has a 45% stake in Majnoon and Petronas has 30%, with state-run Missan Oil Company holding the state's 25% interest. The cost recovery and $1.39/b remuneration fee is not enough compensation, especially with the government having slowed down development plan and sub-contracting approvals -- in large part due to a cash crunch after the recent oil price decline -- which altered the financial equation for the contract.

Shell had attempted to reduce the production target from 1.8 million b/d, but had been unsuccessful, and it missed production milestones that triggered fees, which Shell said in September forced it to decide to relinquish the field altogether.

Shell remains a 49% stakeholder in the Basra Gas Company joint venture with state-run South Gas Company, and is developing a petrochemicals complex with the industry ministry.

Anton Oil is a Chinese company with contract activity in Iraq's Halfaya, Buzurgan and Ahdab oil fields, as well as a drilling partnership with the state-run Iraq Drilling Company.

--Herman Wang,

--Irene Tang,