BP, CNPC set for Iraq Rumaila oil field licence

Iraq’s cabinet has approved a deal with BP and CNPC to develop the huge Rumaila oil field in the country’s first international energy deal since the American led invasion in 2003. BP will share the licence to extract oil from the Rumaila field near Basra with CNPC, the state-owned parent of PetroChina, and the Iraqi oil ministry. A spokesman for BP yesterday refused to confirm that the deal had received official sanction, adding that the company had heard only reports of the approval and had not spoken with Iraqi officials directly.

The agreement, which was brokered in June during the first round of tendering for licences to exploit Iraq’s enormous and largely untapped hydrocarbon resources, should also send “a strong signal” to other energy groups that the Iraqi administration is keen to secure deals.

Abdul-Mahdy al-Ameedi, the deputy director of Iraq’s Petroleum Contracts and Licensing Directorate, said: “We believe that we have a strong pillar now for our work toward realising our plans.” Mr al-Ameedi was speaking in Istanbul, where Iraqi officials are meeting oil companies ahead of a second tender of oil-field contracts due in December.

Separately, Iraqi officials have also reopened talks with Royal Dutch Shell about a revised offer for licences connected to an oil field in the city of Kirkuk in the north of the country.

Analysts estimate that the Rumaila field has the potential to produce 17 billion barrels during its lifetime, with Iraq aiming to increase production at the site by 2 million barrels a day.

The country has the world’s third biggest oil reserves, but has suffered from a lack of investment and United Nations restrictions on exports during the Saddam Hussein era. In more recent years, insurgent attacks on Iraq’s oil fields have also hampered supplies.

Most of the 32 oil companies that originally joined the tender process for licences connected to six oil fields and two gas fields, including the likes of Exxon Mobil and Total, withdrew complaining that the terms imposed by the Iraqis were not generous enough. BP and CNPC agreed to run the Rumaila field after Exxon Mobil turned it down.

Tags:  BP, CNPC, Iraq, oil