BP, and China National Petroleum Corporation (CNPC), have signed a technical service contract with Iraq's state-owned South Oil Company (SOC) to expand production from the Rumaila oil field, near Basra in southern Iraq.
The signing follows BP's successful bid for the contract with CNPC in Baghdad in June.
The consortium led by BP (38 percent) with partners CNPC (37 percent) and the Iraq government's representative State Oil Marketing Organization (SOMO - 25 percent), has agreed to nearly triple the Rumaila field's output to almost 3 million barrels of oil a day (b/d), which would make it the world's second largest producing oil field.
BP and CNPC plan to invest approximately $15 billion in cash over the 20 year lifetime of the contract with the intention of increasing plateau production to 2.85 million b/d in the second half of the next decade. Once production has been raised by 10 percent from its current level of about 1 million b/d, costs will start to be recovered, and fees of $2 a barrel earned on the incremental oil production.
"We are pleased to have this opportunity to work with the people of Iraq to develop one of the world's great oil fields and we see this as the beginning of a long-term relationship with Iraq," said BP's chief executive Tony Hayward.
"We are also pleased to have the opportunity to help Iraq rebuild its economy after years of war and sanctions. The investment in Rumaila will support Iraq in achieving its ambition of becoming a major player in global oil markets once again and will catalyze training and development opportunities for the many thousands of Iraqi workers on Rumaila," Hayward added.
The Rumaila Field Operating Organization (ROO) will manage the rehabilitation and expansion project. ROO will be staffed mainly by employees from South Oil Company and will contain a small number of technical experts and managers from BP and CNPC.
BP has already gained information about the Rumaila field through a three year memorandum of understanding to provide technical assistance from 2005 and historically has knowledge of the field's geology dating back to discovery in 1953.
BP and its partners intend to use their reservoir management expertise to boost recovery and increase production from the Rumaila field, focussing initially on waterflood and gas reinjection optimization.
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