U.S. oil services provider
Weatherford International Ltd
) has received Iraqi cabinet approval regarding a contract worth
$843 million from a group led by Italian energy giant
). The contract is for oilfield facilities development in the
Zubair field, in Basra in southern Iraq.
The pact extends for a period of 18 months and entails
Weatherford to build six crude production units, each having a
processing capacity of 50,000 barrels per day (bpd). Currently,
Zubair yields about 254,000 bpd, which is expected to be augmented
by 100,000 bpd by year-end 2012.
The Eni led consortium - consisting of U.S.based
Occidental Petroleum Corp
) and South Korea's KOGAS - was awarded the field development deal
in 2010 through an Iraqi licensing auction held in 2009. Per the
agreement, the group was required to enhance yield at Zubair to 1.2
million barrels a day by 2017. The group was further required to
sustain output at that level for another seven years.
Eni manages the Zubair project with an interest of 33%, while
Iraq's state-run Missan Oil Co., Occidental and KOGAS hold 25%, 23%
and 19%, respectively.
Iraq is determined to increase its oil production to 12 million
bpd by 2017. With this view, it has awarded substantial oilfield
development contracts to major players like
Royal Dutch Shell
). The current need, however, is to upgrade its export
infrastructure, which has become obsolete. It lacks the capacity to
handle Iraq's future expected output raise. As of now, Iraq exports
about 2.4 million bpd and expects to deliver 2.5 million bpd in
We believe Weatherford's participation in Iraq's oil production
growth will turn out to be highly beneficial for the company and
create a superior growth potential.
Weatherford holds a Zacks #3 Rank, which is equivalent to a Hold
rating for a period of one to three months. Longer term we maintain
a Neutral recommendation on the stock.
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