BP is in discussions with Iraq's oil ministry over output levels at the 1.5mn b/d Rumaila field, as efforts to maintain production raise questions whether the 2020 plateau target will be reached.
BP agreed in 2014 a plateau target of 2.1mn b/d, from a previous target of 2.85mn b/d. But Rumaila's main reservoir is declining by 17pc/yr, meaning BP needs to add around 250,000 b/d of new output just for production to remain where it is.
BP has injected up to 1mn b/d of water to maintain Rumaila output at 1.5mn b/d, BP Iraq country manager Zaid Elyaseri said at the Basrah Oil and Gas conference in Beirut. Elyaseri said in May that Rumaila water injection from its Qarmat Ali plant was running at a record 900,000 b/d.
BP is in discussions with the ministry over Rumaila's next phase of production "for 2018 and beyond", Elyaseri said. This includes field development, how to increase output, investment and the plateau.
Russia's private-sector Lukoil reached a deal with last month to lower its 2020 plateau target for the 13bn bl West Qurna 2 project to 800,000 b/d from 1.2mn b/d.
Elyaseri said it had not yet negotiated technical service contract (TSC) revisions with Iraq's oil ministry.
Iraq hoped to amend TSC terms by the end of 2015. Consultant Farouk al-Kassim was hired earlier this year to discuss potential amendments. BP had been told these would be concluded as early as March. Al-Kassim has completed and submitted a report to the ministry, and this has been sent to the Iraqi parliament for approval, former oil minister and now prime ministerial energy adviser Thamir Ghadhban said today.
Ghadhban said the ministry was concerned not only with amending the contracts, but with working with foreign operators to ensure they do not overspend.
"The international oil companies should work in a manner which is more efficient and cost-effective," he said. "They should show the ministry their measures to reduce costs".
TSCs do not incentivise foreign oil firms to reduce expenditure. Iraq reimburses for capital and production costs, and pays upstream firms a fixed remuneration fee of up to or around $2/bl in crude. But the drop in global crude prices is straining Baghdad's ability to pay and to meet its export revenue requirements. A fixed profit margin does not promote efficiency.
