Iraq's Oil Output Revival at Stake for Want of Water

Zubair, run by Italy's ENI, is feeling the pain too. A source at state run South Oil Company said production from Zubair had fallen, but declined to give further details. It was currently pumping around 280,000 bpd, the source said.

"100 percent correct," another Iraqi oil source in Baghdad said when asked if lack of water was a reason behind the production decline in the two oilfields.

Infrastructure and logistical constraints, as well as security worries, have already forced Iraq to cut its 2014 oil output target more than once – to 3.7 million bpd from an initial target of 4.5 million bpd, excluding Kurdish oil exports. Saudi Arabia's output was around 9.6 million bpd in August, according to OPEC figures.

The water injection project, where the first phase is designed to pump 5.2 million bpd of treated seawater from the Gulf to the fields, was originally supposed to be completed by the end of 2013. It is now not due to come online before 2018-2019, the sources say.

When the plan was announced in 2010, U.S. oil company ExxonMobil was chosen to take the lead in coordinating initial studies for the plan.

But red tape and disputes over cost delayed the plan for months, and Exxon was removed from the project in 2012 due to disagreements over the economics of the deal. State-run South Oil Co. has since taken over project management.

Apart from the project itself, hurdles to approving contracts for service work, such as building new pipelines and drilling wells, as well as getting visas and customs clearance are top complains by oil executives working in the south.


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