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Iraq shortlists firms for key Basrah water-injection project

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Iraq shortlists firms for key Basrah water-injection project

Highlights

Iraq has shortlisted five engineering companies to bid for the first phase ofa critical water-injection project that will help the country boost long-termproduction from its southern oil fields.

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Ihsan Abduljabbar Ismaael, the director general of the state-run Basrah OilCompany, told reporters Saturday there are five "international companies"competing to win the project, and the "technical tender" will be awarded thismonth.

The Common Seawater Supply Project (CSSP) would ultimately take in around 5million b/d of water from the Persian Gulf, process it for field injection,and deliver it by pipeline to a half dozen fields in Basrah province.

Most of the fields in Basrah, which in addition to being the route for nearlyall of Iraq's oil exports is the country's largest producing province, areoperated by international oil companies under technical service contracts thatrequire the government to provide water to maintain pressure.

The project has been under discussion internally and with contractors andinvestors for nearly a decade. It is expensive, priced at $12 billion whencapacity was to be 10 million b/d of water flow.

The most recent figure used publicly was 5 million b/d of water in two phases,with phase one to be tendered in 2017, oil minister Jabbar al-Luaibi said lastyear. Ismaael did not provide further details but said the tender covers a "separateproject" from a multi-faceted field and infrastructure upgrade deal beingnegotiated with ExxonMobil. It is unclear if all or an initial aspect of theproject will be removed from the Exxon project.

ExxonMobil and China National Petroleum Corp have been in discussions withIraq for three years over a project that includes the CSSP, expanding onshorepipelines, storage and pumping, and developing the Nahr Bin Umar and Ratawioil fields.

Two senior officials involved in negotiations independently told S&P GlobalPlatts that talks continue. Last week, a senior ExxonMobil official met withLuaibi in his office, the ministry said in a statement.

MAJNOON DEVELOPMENTS

Ismaael also said a final contract has not yet been signed with Petrofac andAnton Oil covering the development of the Majnoon oil field for two years.Senior officials last week said an agreement had been reached, but Ismaaelsaid Iraq still requires the project's costs to be reduced. Majnoon, which produces 235,000 b/d, has been operated by Shell with juniorpartner Petronas since 2010. A stalemate in renegotiating the contract led theconsortium to hand it back to Iraq, which it will do by the end of June.Instead of contracting it out to another IOC, Basrah Oil Company will operatethe field and subcontract work it doesn't have the manpower or expertise todo. Ismaael confirmed that this month the Basrah oil terminal and one single pointmooring will be offline briefly for repairs and maintenance. He said itultimately will not impact loading targets. "There are efforts, despite the stoppage and the maintenance, to keep thecurrent exportation rate, which is 3.5 million b/d," he said. Crude traders said Monday maintenance work at the single point mooring systemhas been deferred to May from early April. It was not immediately clear howlong the rescheduled maintenance would last or the impact on the May crudeloading program.

The Iraqi oil ministry had initially notified Basrah crude lifters it wouldcarry out maintenance work at SPM-3, one of its four SPMs in the Persian Gulf,in April, sources told S&P Global Platts late last month. With the initial maintenance, sources estimated about 10 million barrels ofoil would be cut from the April loading program, most of it Basrah Heavy. Ismaael also confirmed Iraq's smallest terminal, Khor al-Amaya, is currentlyoffline for repairs to prevent leaks. The terminal was processing less than100,000 b/d, when averaged over a month, before it was taken offline more thantwo months ago. --Adal Mirza, adal.mirza@spglobal.com, with Staff