Iraq Sweetens New Oil Project Terms, Blames Shell for Delay
BAGHDAD/LONDON, Aug 27 (Reuters) – Iraq has offered investors more lucrative terms to tap a large oilfield and build a refinery, while blaming Royal Dutch Shell for underproducing billions of dollars' worth of crude.
The Nasiriya oilfield holds reserves of more than 4 billion barrels and could contribute to Baghdad's plan to treble output by the end of this decade with the help of foreign companies.
But Iraq's output has slowed this year and companies have complained about their slim margins on existing service contracts. Some have angered Baghdad by signing contracts with the semi-autonomous northern Kurdistan region in search of better terms.
"The oil ministry was keen to draft a contract which includes more lucrative and sweetened terms compared to the previous service contracts," an Iraqi oil industry source said.
"In this contract, operators will have no state partner and no signature bonus should be paid. That definitely will bring more profit for the project's operator."
The project involves developing the southern field and building a 300,000 barrel-per-day refinery. Previous agreements have stalled. In 2009, a Japanese consortium was selected to invest, but negotiations fell apart.
More hopeful of progress this time, Iraq in March shortlisted seven international oil companies (IOCs) to bid in an auction planned to be held in December this year, and added five more companies to the list earlier this month.
"It is going to be with completely different contract shapes that are going to be very attractive to the oil companies," Iraq's Oil Minister Abdul Kareem Luaibi said earlier this year of the investment terms for Nasiriya.
Iraq's output began to expand in 2010 after it secured service contracts with IOCs such as BP, Shell, Eni and Exxon Mobil.
The revival slowed in 2013 due to infrastructure and security problems, keeping output below 3 million barrels per day (bpd) in July, athough supply is expected to start rising again later the year.
Majnoon Delays
Oil industry sources say part of the reason for the lag in production is the delayed start-up of Majnoon, an oilfield being developed by Shell and minority partner Malaysia's Petronas, which has angered the government.
A letter sent by the government last month, and seen by Reuters, blames Shell for missing start-up dates at the field, which holds 12 billion barrels, costing Iraq $4.6 billion. Delays over pipeline work started a year ago.
Shell has built up a strong position in southern Iraq as operator of Majnoon, junior partner with Exxon at West Qurna-1 and a partner in a natural gas project. The three ventures will cost around $100 billion.
The spat indicates the infrastructure challenges facing foreign oil companies working in Iraq. Industry sources say Shell is particularly wary of health and safety failings, so work may take longer.
Shell, asked to comment on the letter, said it found when it started opening existing facilities towards the end of 2012 that extra work was needed. The company said it was still targeting output of 175,000 bpd at Majnoon before the end of the year.
"The safety of our people and assets remains our top priority in Iraq, so we have been working on getting the facilities back to an acceptable condition and ensure a safe and reliable operation," a Shell spokesman said.
"Drilling operations to restart new production in Majnoon have successfully concluded and we expect to open the wells in the near future."
Other oil executives downplayed the spat, seeing it as a largely routine part of sometimes rocky relations between the industry and its host governments.
"It's noise – no big deal," said one, from a rival company. "It's just the Ministry of Oil diverting attention that the delay is largely SCOP's (Iraq's State Company for Oil Projects) fault."
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Weatherford CEO's Rebound Plan Relies On Getting Smaller
- Iran Says Oil Market Is Too Tight For US Zero Exports Target
- China's Squeezed 'Teapots' Eye Petchem Path To Riches
- Baker Hughes: US Drillers Add Oil Rigs For Second Week In Three
- Venezuela Hands China More Oil Presence, But No Mention Of New Funds
- ExxonMobil Racks Up Discoveries in Guyana Block Eyed by Chevron
- Oil Market Sentiment Has Improved Significantly
- EU, US Eye Collaboration on Nuclear Materials
- USA Driving Activity to Increase to All-Time Highs
- EU Electricity Export to Ukraine Up 94 Percent in Two Years
- China Coal Output Falls for First Time since Government Ordered More
- TC Energy to Sell Prince Rupert Gas Pipeline Project to First Nation
- BP Pulse Buys One of Europe's Largest Truck Stops
- UK CCUS Plans Outdated: Think Tank
- I Squared Eyes Full Ownership of Europe Gas Storage Firm
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- EIA Drops 2024 Henry Hub Gas Price Forecast
- EIA and Standard Chartered Offer Up Latest Oil Price Predictions
- Red Sea Region Sees Another Watershed Incident
- Chevron Oil Project in Kazakhstan to Cost $48.5B
- OPEC Voices Encouragement after IEA Affirms Support for Oil Security
- Biden Govt Bares Strategy for Freight Charging, Hydrogen Fueling Infra
- Ukraine Hits Third Russian Refinery In Escalating Drone Strikes
- Rystad Looks at the Buzz Around White Hydrogen
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Is Peak Oil Demand Close?
- Vessel Sinks in Red Sea After Missile Strike
- JP Morgan, Standard Chartered Reveal Latest Oil Price Forecasts
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Rystad Forecasts Net Production of Top Permian Producers in 2024
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension