Baghdad — Iraq is negotiating a potential reduction in long-term plateau productionrates at fields awarded to international oil companies in the two biddingrounds in 2009, in a move that will bring Iraq's oil production capacityoutlook down to more realistic levels.
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Abdul Mahdy al-Ameedi, the director general of the oil ministry'sPetroleum Contracts and Licensing Directorate, said the tweaks to productionlevels will be done via the new development plans agreed with the IOCs.
The fields being discussed are Zubair, operated by Italy's Eni, and theBP-operated Rumaila.
"So far in Zubair, there is an agreement to reduce the plateau productionrate from 850,000 b/d to 750,000 b/d," he told S&P Global Platts this week.The field is currently producing around 450,000 b/d.
"In Rumaila, they are discussing reducing the production rate from 2.1million b/d to maybe 1.8 million b/d," Ameedi said. Rumaila is producing 1.45million b/d.
But Ameedi added that "there is nothing final," and none of the planshave been approved yet.
The Garraf oil field, awarded in the second bidding round to Malaysia'sPetronas, will remain at the contracted 230,000 b/d production rate, he said.
West Qurna 1, operated by ExxonMobil, and the Missan oil fields operatedby the China National Offshore Oil Corp., are also being discussed for plateaureductions, Ameedi said, though he wouldn't provide hard numbers.
Under Iraq's 2009 bid rounds, fields were awarded to international oilcompanies on the basis of a per barrel remuneration fee, and plateauproduction targets. Critics of the bid rounds said the plateau productiontargets led to IOCs promising unrealistic targets for fields.
In a sign of realism, Iraq's deputy minister for upstream and directorgeneral of the Basra Oil Company said in Houston in early May that the countryis targeting 8 million b/d production capacity by 2025. This is down from themore than 13 million b/d production capacity had all bidding round contractsmaintained original targets and development stayed on track.
Development of these fields has generally lagged original plans due to ahost of factors including falling oil prices, non-payment by the government tocontractors, delays to work program and project approvals and lack ofinfrastructure.
PUSHING TO FINALIZE NEW CONTRACTS
Ameedi said the ministry will attempt to push through approvals of theApril 26 fifth bidding round contracts before the next Parliament is sat. Thesix contracts for exploration areas on Iraq's borders with Iran and Kuwaithave been initialed by the ministry and companies, but require Cabinetapproval before final signing.
With results of the May 12 election in a limbo, however, it's unclearexactly when the current government's authority will expire and whether thenext government will be as IOC-friendly. Technically, the parliament'sauthority ends July 1, making the government a caretaker.
"Next week, we will refer a letter from the Ministry of Oil to theCommittee of Energy Affairs in the Cabinet, requesting the approval of theCabinet on the awarded contracts," he said. "So, I hope we will have time."
Another contract requiring government continuity is a multi-billiondollar infrastructure-field development project in southern Iraq withExxonMobil and PetroChina. It would leverage revenues from developing twocurrently state-operated fields to pay for water injection pipeline systems,feeder lines, export lines, and pumping stations, among other projectsnecessary to debottleneck and expand production capacity in southern Iraq.
The project has been under negotiation since 2015.
"The only issue remaining is commercial," Ameedi said, adding that theministry has told ExxonMobil the maximum profit sharing it would agree to."Next week we will have a meeting with them, and we will see if they will tellus their position or not, and we will set a deadline for the negotiation withthem."
--Edited by Geetha Narayanasamy, firstname.lastname@example.org