Iraq expects three of its oilfields will together pump more than 6 million barrels a day once foreign companies complete development work they were awarded this year. BP Plc and other international oil companies have signed contracts for the Rumaila, Zubair and West Qurna fields, which were originally offered in Iraq’s first post-war licensing round in June.
“Total production from the three fields exceeds 6 million barrels a day and this is higher than what we were hoping for from all the eight fields in the first bid round,” Oil Minister Hussain al-Shahristani said in an interview recorded in Baghdad yesterday. Today’s oil prices near $80 a barrel are not hindering the global economy, he said.
Iraq pumped 2.45 million barrels a day last month, according to Bloomberg estimates, making it OPEC’s third-largest producer after Saudi Arabia and Iran. The country hasn’t exceeded 3 million barrels a day since 2000, when the late Saddam Hussein was still president.
Sitting atop the world’s third-largest oil reserves, Iraq is allocating licenses to international companies as it seeks to boost output from its oil and gas industry after years of neglect. It awarded its largest field, Rumaila, to London-based BP and China National Petroleum Corp. in the summer.
Rumaila was the only oilfield contract to be awarded by Iraq out of eight projects in the June bidding round, the first since the U.S.-led invasion in 2003. Most bids failed because companies wanted higher remuneration fees than the ministry was willing to pay. Iraq retains ownership of oil in the fields.
The country’s second bidding round next month, with a new set of fields, will result in a “better match,” al-Shahristani said. “I think both sides have learned their lessons” from the first round, he said.
BP’s plan to almost triple Rumaila’s output to 2.85 million barrels a day would make it the world’s second-largest producing oilfield, the company said in a Nov. 3 statement.
The West Qurna field, also on the first round list, was subsequently awarded last week to Exxon Mobil Corp. and Royal Dutch Shell Plc after the companies held direct talks with the ministry. Similarly, Zubair was awarded to Italy’s Eni SpA. Contracts for those two fields will be discussed at Iraq’s next cabinet meeting, al-Shahristani said.
Oil has gained 74 percent this year and last month traded above $80 a barrel for the first time in a year.
Not Hurting Economy
“I do not think the current price is hindering the recovery of the world economy,” the minister said. “We have been witnessing a fairly satisfactory recovery in a number of regions of the world at current price levels,” he said.
Iraq seeks to boost its oil production capacity eventually to between 10 million and 12 million barrels a day through the second bidding round, al-Shahristani said last month. Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries, currently pumps just over 8 million barrels a day.
Iraq is the only OPEC member not bound by the group’s quotas system and expects this exemption to last for many years.
The country’s current output “is way below what is expected of a country with the reserves of Iraq and the needs of Iraq,” the minister said. “Of course when we reach that stage in six years time then the issue will be taken up and we discuss with our partners in OPEC.”
Asked about oil companies operating in the northern part of the country controlled by the semi-autonomous Kurdistan Regional Government, al-Shahristani said the Baghdad-based oil ministry hasn’t received, or been consulted on, any oil contracts negotiated by the KRG.
More Natural Gas
Expansion plans in the oil industry mean Iraq can probably boost its production of natural gas, which is also found in oil wells.
Iraq is one of several potential suppliers for the planned Nabucco gas pipeline, which aims to shift Caspian and Middle East natural gas to European buyers, sidestepping Russia.
Asked when his country might commit to supply gas to Nabucco, al-Shahristani said: “We do not expect in the near future or the coming few years to be able to provide dry gas or LNG to the international market before meeting our domestic demand.”
Rising gas supply will be used at first for local electricity production and may later be exported. Liquefied natural gas, or LNG, is gas that’s cooled to a liquid form for easier transportation by ship.
Shell, based in The Hague, is a possible partner to help Iraq capture flared natural gas from Rumaila, Zubair and West Qurna and transform part of that into LNG for export, the minister said.
“Shell and other companies are under discussion with us but we have not reached any conclusion,” he said.