BP, CNPC Pay $500 m Signing Fee for Iraq Oilfield

Source: Reuters 1/15/2010, Location: Middle East

Oil major BP and Chinese partner CNPC have paid a $500 million (306 million pounds) signature bonus due on the contract they won to develop Iraq's supergiant Rumaila oilfield, a senior Iraqi oil sector official said.

The Iraqi Oil Ministry and the BP-led consortium also agreed to set the baseline production level at Iraq's biggest oilfield at 1.066 million barrels per day, Dhiya Jaafar, current head of the South Oil Co, said in the southern oil hub of Basra.

"The effective date for the Rumaila contract was December 17 and they (BP and CNPC) notified us in recent days that we would receive $500 million. We have concluded the bank transfer," Jaafar said.

The contract to develop the workhorse field of the Iraqi oil industry was the first of a series of deals that Iraq struck with foreign oil firms last year as it sets the foundations to catapult itself into third place among oil producers.

If all goes as planned, Iraq could reach an oil output capacity of 12 million barrels per day in under a decade, rivalling top oil powers Saudi Arabia and Russia and giving it the billions it needs to rebuild after years of war and economic decline.

The contracts are subject to hefty signature bonuses. In the Rumaila agreement, which emerged from a first round of tenders in June, the signature bonus is considered a soft loan that will be repaid through 20 quarterly payments, starting from the ninth quarter after the effective date.

Iraqi officials have said they are willing to repay the bonus either in cash or in the form of oil, depending on the companies' wishes.

BP has a 38 percent stake in the venture and CNPC a 37 percent stake. The South Oil Company is a 25-percent partner.

The consortium intends to increase output from the 17-billion-barrel field to 2.85 million barrels per day.


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