Analysis: Ending the ExxonMobil Presence at West Qurna 1

By Ahmed Mousa Jiyad.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Ending ExxonMobil Presence in WQ1 Oilfield

Legal-Contractual Discussion with Economic-Financial Analysis

Information indicates that the Iraqi Ministry of Oil (MoO) proposed to acquire (buy) ExxonMobil's participation interest (PI) in the West Qurna 1 (WQ1) oilfield for $300 million, and that the final decision depends on the formation and approval of the new government.

The proposal revives the divergent positions that prevailed within MoO when discussing a similar situation in 2018 relating to the same oilfield.

Click here to download the full report in pdf format.

Mr Jiyad is an independent development consultant, scholar and Associate with the former Centre for Global Energy Studies (CGES), London. He was formerly a senior economist with the Iraq National Oil Company and Iraq's Ministry of Oil, Chief Expert for the Council of Ministers, Director at the Ministry of Trade, and International Specialist with UN organizations in Uganda, Sudan and Jordan. He is now based in Norway (Email: mou-jiya(at)online.no, Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.

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Pertamina to Increase Holding in West Qurna 1

By John Lee.

Pertamina, the Indonesian state-owned energy company, will reportedly buy an additional 10 percent stake in the West Qurna 1 oilfield from ExxonMobil.

The Deputy Director-General of the Basra Oil Company (BOC), Hassan Muhammad Hassan, told the official Iraqi News Agency (INA) that the agrreement, "is subject to the signing of the settlement agreement with the Basra Oil Company."

Pertamina previously had a 10 percent holding.

The Iraqi cabinet had previously agreed to allow BOC to take over ExxonMobil's holding in the field, at a price of "up to $350 million."

(Source: INA)

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US Law Firm Awarded for Iraq Advisory Role

By John Lee.

New York-based law firm Cleary Gottlieb Steen & Hamilton LLP has won the Infrastructure and Energy Projects Team of the Year award at Law.com International's Middle East Legal Awards 2022.

According to a press release from the firm, it "was recognized for advising on Iraq's gas growth integrated project, one of the largest projects ever in Iraq."

The firm represented the Iraqi Ministry of Oil and two Iraqi state-owned companies, Basra Oil Company (BOC) and South Gas Company (SGC), in the major $27-billion investment project with France's TotalEnergies.

Cleary partner Andrew Bernstein and associate Jad Nasr were mentioned as part of the team advising the Iraqi government in a Law.com International article about the deal.

The firm had previously advised Iraq's oil ministry on a $17.2 billion deal with Shell and Mitsubishi to develop the infrastructure required to process natural gas in the southern part of Iraq.

(Source: Cleary Gottlieb)

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Iraq to Increase Oil Export Capacity

By John Lee.

Basra Oil Company (BOC) has reportedly said that third offshore pipeline at the Khor Al-Amaya Oil Terminal (KAAOT) (pictured) will be completed by the end of 2023.

Acting Director General, Ahmed Fadel Dehaim, told the Iraqi News Agency (INA) that the new line will increase oil export capacity by 600,000 barrels per day (bpd).

He said another 300,00o bpd of capacity will become available sooner, following the completion of work to restore another pipeline that was damaged two years ago.

(Source: INA)

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Chinese Consortium wins $594m Iraq Oil Processing Contract

By John Lee.

Kuwait Energy Basra Limited (KE Basra), an indirect wholly-owned subsidiary of Hong Kong-based United Energy Group (UEG), has entered into the EPCC (engineering, procurement, construction and commissioning) contract with a Chinese consortium to provide a central processing facility including oil treatment system and auxiliary systems at Block 9 in Basra.

The contractor is a consortium formed on 31 December 2020 and consisting of China CAMC Engineering and CNOOC Petrochemical Engineering.

According to disclosure documents lodged with the Stock Exchange of Hong Kong, the contract price is US$593,584,975 and the work should be completed within 33 months from the date of commencement. (The foundation stone for the project has just been laid).

The main purpose of this central processing facility project is to increase crude oil production capacity of Block 9 to 100,000 barrels per day (bpd).

In its statement to the Hong Kong Stock Exchange, UEG added:

"Kuwait Energy Basra Limited is a limited liability company incorporated in British Virgin Islands and an indirect wholly-owned subsidiary of the Company.

"KE Basra is the operator of the Block 9 contract area located in the Basra Governorate, Southern Iraq, pursuant to the Exploration, Development and Production Service Contract with the contracting parties of Basra Oil Company (an Iraqi State Oil Company), KE Basra, Dragon Oil (Block 9) Limited and Egyptian General Petroleum Corporation."

(Source: UEG)

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Work Starts at $594m Oil Processing Plant at Block 9

By John Lee.

The President of  the Iraqi National Oil Company (INOC) has laid the foundation stone for the $594-million crude oil processing plant at Block 9, within the Al-Fayha Oil Field in Basra Province.

Ihsan Abdul-Jabbar Ismail said that the development is important for the production of light oil, with a target for this project of up to 100,000 barrels of crude oil per day, along with 135 mmscfd of gas at a future stage for electricity production.

Khaled Hamza, General Manager of Basra Oil Company (BOC), said the development of the field was started in 2014 by Kuwait Energy Company (KEC) and continued by the Chinese company UEG [United Energy Group] which acquired KEC, and that the first exploration well was drilled and the results were encouraging.

He stressed that the oil produced from the exploration Block 9 is one of the best types of oil globally.

The CEO of UEG, Sonk Yu [Song Yu, Chief Operation Officer??], said that laying the foundation stone for the development was an important moment for the company.

(Sources: Ministry of Oil, UEG)

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Iraq to buy Exxon stake in West Qurna 1

By John Lee.

The Iraqi cabinet has agreed to allow the Basra Oil Company (BOC) to take over ExxonMobil's holding in the West Qurna 1 oilfield, at a price of up to $350 million.

Addressing media after Wednesday's cabinet meeting, Minister of Communications Arkan Al-Shaibani (pictured) said the cabinet also allocated an initial payment of $250 million "according to the acquisition amount to cover the Basra Oil Company's share in the work program and the budget for the year 2022 according to new developments provided that ExxonMobil relinquishes its litigation against the Basra Oil Company at the International Court of Arbitration."

Note that other media list the acquiring entity as the Iraqi National Oil Company (INOC).

(Sources: Govt of Iraq, Reuters, S&P Global Platts)

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New Water Injection Facility at Rumaila

One of the most advanced water pumping facilities in Iraq has been constructed at the Rumaila oilfield to help boost oil production and support the field's long-term strategy.

Cluster Pump Station Six (CPS-6) is the first CPS facility to be built at Rumaila for around 40 years. It is also the first CPS constructed by the Rumaila Operating Organisation (ROO), the joint venture between the Basra Oil Company (BOC), bp, PetroChina and State Oil Marketing Organisation (SOMO), which operates the field.

Water injection is fundamental for sustaining Rumaila's high volumes of oil production. After almost 70 years of extracting oil, gas, and water, Rumaila's mature reservoirs have seen pressure levels fall; injecting water into the subsurface helps to replace this lost pressure and push oil and gas to the surface. Since CPS-6 has become fully operational, 18 formerly producing wells have been reactivated and around 63,000 additional barrels of oil per day are being produced for Iraq.

ROO Deputy General Manager, Hussein Abdul Khadim Hussein, said:

"Rumaila's daily oil production has increased by around 40% under ROO's stewardship. Key to this has been the water injection strategy, which rose from around 250 mbds in June 2010 to reach peaks exceeding 1.5 million barrels of water per day (bwpd) in 2021. CPS-6 marks a new chapter as we extend water injection to the south of the field for the first time in more than a decade and will help us to maintain high oil production for years to come."

Cluster pump stations pressurize treated industrial water to a specified level, which is then sent for injection into water injector wells in the field. With a capacity to inject up to 320,000bwpd, CPS-6's features include digital monitoring of the site's key equipment and components to manage pressure levels and ensure performance is maximized from the purpose-built control room.

The site has a pumping house with five powerful Sulzer pumps, each individually capable of pressurizing up to 80,000bwpd; a manifold to direct water to 20 injector wells; 2.5 km of piping inside the facility; 75 km of supporting pipeline infrastructure outside the facility, and an office for staff.

Construction entailed more than a million hours of work, and the installation of 16,700 metres of electrical cabling, 1,721 flanges and 575 valves. Multiple logistical challenges had to be overcome in order to adapt to the pandemic and to create a COVID-safe working environment, which included erecting fences inside the compound to delineate which contractor could operate in each part of the site.

ROO General Manager, Orkhan Guliyev, said:

"The full operation of CPS-6 is a major milestone in our drive to maintain oil production in the south of the field. For the past 11 years, water injection has been focused in North Rumaila - which has seen production increase by more than 150%. Safely injecting water in South Rumaila is a key part of ROO's strategy for future success."

Rumaila Special Deputy General Manager, Fan Jianping, added:

"Work has also begun to construct a second new pumping station, CPS-7, which will further our ambitions to ensure the reservoirs in South Rumaila continue to produce effectively and efficiently."

(Source: ROO)

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Basra Energy Company established to run Rumaila Oilfield

By John Lee.

The Iraqi Ministry of Oil has officially established the new Basra Energy Company (BEC), which will be the main contractor at the giant Rumaila oilfield, under a Technical Service Contract (TSC).

Representing BEC at the ceremony, Zaid Elyaseri (BP) said the field will be developed to reach a peak production of 1.7 million barrels per day (bpd), up from the current level of approximately 1.45 million bpd.

Oil Minister Ihsan Abdul Jabbar added that, "PetroChina and BP are the two shareholders with SOMO and Basra Oil Company (BOC)." PetroChina is a subsidiary of the China National Petroleum Corporation (CNPC).

(Source: Ministry of Oil)

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Kadhimi “wants US Firm to replace Exxon” at West Qurna 1

By John Lee.

According to a report from Reuters, the Iraqi Prime Minister Mustafa al-Kadhimi has told the press in Washington DC that he wants another American company to replace ExxonMobil when it exits the West Qurna 1 oilfield.

Meanwhile, S&P Global Platts reports that Exxon filed an arbitration case against the state-owned Basra Oil Company (BOC) related to its stalled attempt to sell its stake in the field.

More here and here.

Read also: The Demise of ExxonMobil in the Iraqi Petroleum Sector 

(Sources: Reuters, S&P Global Platts)

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