PetroChina has replaced Exxon as the operator of the West Qurna 1 field in southern Iraq, holding the largest stake in the field.
"We studied the settlement agreement and the oil ministry with the Basra Oil Company believe that the best option is for PetroChina to become the lead contractor of West Qurna 1," a deputy manager at Iraq's Basra Oil Co. said, as quoted by Reuters.
Exxon made public its plans to exit Iraq's oil industry in 2020, with reports emerging last year saying it was in talks with two Chinese companies to sell the West Qurna 1 stake to.
Some reports suggested that Exxon's decision might have something to do with worsened relations between the supermajor and the Iraqi government after Exxon got involved in oil production in the Kurdistan autonomous region, whose leadership is at odds with Baghdad.
Now, Exxon's stake in West Qurna 1 will be transferred to state-owned Basra Oil Company, with PetroChina as the lead contractor operating the field.
Besides PetroChina, shareholders in West Qurna 1 include Indonesia's Pertamina, which last year bought a 10% stake in the field, and Japan's Itochu. Basra Oil Company will become the majority shareholder after the completion of the Exxon deal, with over 50% in the field.
West Qurna 1 is one of the largest oil fields in the world, with reserves estimated at more than 20 billion barrels of recoverable hydrocarbons. Production averages 500,000 barrels daily and makes the field a cornerstone in Iraq's plans to boost its national total considerably.
There are ambitions to raise production capacity to between 7 and 8 million barrels daily, from a current capacity of 5 million bpd, with actual production rates at some 4.5 million barrels daily. However, analysts have noted it would be a tough thing to do, and production capacity would probably peak below this level, at some 6.3 million barrels daily.
The most commonly cited reason for this is the politically unstable situation in the Middle Eastern country, which has prevented it from creating an investment-friendly climate for oil companies that are increasingly being squeezed by transition-focused shareholders and other decision influencers, and have become a lot pickier about their investment decisions.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com More
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Comments
The administrative reason is reported worsening relations between Exxon and the Iraqi government after Exxon got involved in oil production in Iraq’s Kurdistan autonomous region, whose leadership is at odds with Baghdad.
The geopolitical factors relate to the rising influence of the China-Russia-Iran axis not only in Iraq but also in the Gulf region as a whole. China has been for years the largest importer of Iraqi crude and also the biggest investor in Iraq’s oil industry.
Iraq sits on the world’s largest reserves estimated to exceed 400 bb between proven and semi-proven reserves according to international experts who assessed Iraq’s oil potential. consequently it is capable in theory of lifting its production to an estimated 7-8 million barrels a day (mbd) from an actual production of current capacity of 5.0 mbd. But to do achieve its goal it needs major investments and above all political stability both of which could prove highly challenging in the current situation. A more achievable figure in the next 5 years could be 6.0 mbd.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert