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Houston — Iraq has reached key preliminary terms with ExxonMobil and PetroChina on a project that will be crucial for the country to reach its new production target of 8 million b/d in the next five to seven years.

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The South Integrated Project, which leverages the development of two fields in southern Iraq to pay for gas plants at the two fields, a multi-field water injection project to boost reservoir pressure, and repairs and upgrades to storage, pipelines and export infrastructure, would be a core driver of production and export growth.

Iraq's southern oil infrastructure

Iraq's Oil Ministry, ExxonMobil, and PetroChina have been negotiating since 2015.

Abdul Mahdy al-Ameedi, director general of the ministry's Petroleum Contracts & Licensing Directorate, told S&P Global Platts that "the scope of work, the schedule, and cost" have been agreed to.

"We need to agree on the fiscals," he said.

The last key hurdle in the technical terms had been the baseline production and plateau production target of the Nahr Bin Umar and Ratawi oil fields, which in recent days was agreed to as a combined 112,500 b/d and 550,000 b/d, respectively, he said.



If the ministry's plans succeed, it will boost production capacity from around an estimated 4.8 million b/d now to 8 million b/d by 2023, Ameedi said.

At an investment seminar on Tuesday, Deputy Oil Minister for Upstream Affairs Karim Hattab and Basra Oil Company Director General Ihsan Ismaael both said that target date is 2025.

Still, to reach either date, there's a lot Iraq must do.

Ameedi said Basra Oil Company has received bids but has not announced a winner in a tender of the first phase of the Common Seawater Supply Project, which will intake Persian Gulf water, process it, and send it to oil fields for injection to maintain reservoir pressure in core operating fields.

Of the 8 million b/d, Ismaael said, 6 million b/d will be produced in Basra, and all fields will need pressure help.

The vast majority of those fields are operated by foreign oil companies in bidding rounds held since 2009. Fields awarded in two bid rounds in 2009 would have put Iraq's production goals at more than 12 million b/d but, Ameedy said, production targets are being reduced and contract timeframes extended during negotiations of the final development plan for each field.

"It is easier" for the companies, he said. "Less effort. Less investment...And they will be relaxed for a longer time in order to achieve it."

Last week, Iraq held a fifth bidding round, for border oil and gas fields and exploration blocks that will, if successful, help reach the production target.

"Next year we are going to try to sustain the current production level, and execute the six fields," Hattab said.

The bidding round was criticized for a severely compressed timeframe, but six of 11 blocks were awarded. The contract model, which is modified from the previous technical service contracts, was first used in an agreement initialed last December with China ZhenHua Oil for developing the southern part of the East Baghdad oil field.

That contract was approved by the Cabinet but has not yet been signed, Ameedi said.

He said the ministry and the winners of the April bidding round are still on track to initial the contracts on May 10, after which they are sent to Cabinet for approval.

Two days later, however, is Iraq's contentious national elections, where delays in forming a government are expected.

"I hope this will be accepted and approved by the new government," Ameedi said.

-- Staff Reports, newsdesk@spglobal.com

-- Edited by Kevin Saville, newsdesk@spglobal.com