By Dow Jones Business News, September 18, 2013, 03:05:00 AM EDT
Oil Majors Negotiate Reduced Iraq Targets
AMMAN, Jordan--Major Western oil companies, including BP PLC (BP), Royal Dutch Shell PLC (RDSA.LN), and Exxon Mobil
Corp. ( XOM ) are negotiating with the Iraqi government to cut their oil production plateaus in the country, reducing
Iraq's overall production target of 12 million barrels a day, a senior Iraqi oil official said.
While these talks have been happening since last year, Russia'sOAO Lukoil Holdings (LKOH.RS) and Italy's largest oil
producer Eni SpA ( E ) have become the first companies to cut their production targets this year.
"We are in talks with BP to reduce the plateau target for Rumaila field from 2.850 million barrels a day to 2.1
million barrels a day," Abdul Mehdy al-Ameedi, head of the Iraqi Oil Ministry's petroleum contracts and licensing
directorate, said at the sidelines of an Iraqi oil meeting in Amman late Tuesday night. BP and partner China National
Petroleum Corp., or CNPC, are producing some 1.4 million barrels a day from the field now.
Shell and partner, Malaysia's Petronas, are negotiating with Iraq to reduce its oil production target at Majnoon field
by 600,000 barrels a day to 1.2 million b/d instead of the previously agreed plateau of 1.8 million b/d, Mr. Ameedi
said. Majnoon is expected to start first production later this month at 175,000 barrels a day.
The Exxon Mobil-led consortium operating the West Qurna Phase One oil field is also currently in advanced talks with
the Iraqi government to reduce its production target from 2.825 million barrels a day to 1.8 million barrels a day, he
said. Exxon is producing around 450,000 barrels a day from the field now.
Exxon has agreed with PetroChina and Indonesia's Pertamina to sell 25% and 10% of its 60% stake in the project
respectively. The U.S. energy giant has angered Baghdad after it signed a number of deals with the Kurdistan regional
government in Erbil. Baghdad and the KRG are at logger head over who should control the oil wealth in the region.
Iraq has reduced its production target by 3 million barrels a day to 9 million barrels a day by 2017. The original
target of 12 million barrels a day wasn't only unrealistic but commercially problematic.
"We don't have the infrastructure to produce, export and store 12 million barrels a day," Mr. Ameedi said. "There [
are] also the market factors...we might not be able to find buyers for that amount of produced crude."
"Supply and demand are important [factors] in the [oil] market and producing such large quantities of oil would affect
oil prices and we could end up selling our crude at lower prices," Mr. Ameedi said. "There are other reasons that have
made us to cut production targets by 3 million barrels a day."
In January this year, Lukoil was the first firm in Iraq to reach an agreement with Baghdad to reduce the production
target at West Qurna Phase Two from 1.8 million barrels a day to 1.2 million barrels a day. Lukoil is expected to start
first production from the field at 150,000 barrels a day later this year or early next year. It's targeting 400,000
barrels a day next year.
The agreement was followed by another in May between Eni and the Iraqi oil ministry to revise the plateau production
target at Zubair field from 1.2 million barrels a day to 850,000 barrels a day. Eni and its partner Occidental
Petroleum, Korea Gas Corporation, or Kogas, and Iraqi state partner Missan Oil Co. are producing some 300,000 barrels a
Write to Hassan Hafidh at email@example.com
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