BP, Iraq Differ On Costs Of Water Injection Project-Official

Wednesday, Sep 14, 2011
 

     
AMMAN (Dow Jones)--Iraq and BPBP PLC (BPBP) haven't yet reached an agreement on reimbursement of costs to build a multi-billion-dollar oil field water injection scheme in southern Iraq, a senior Iraqi oil ministry's official has said.
ExxonMobil Corp (XOM) was chosen on behalf of foreign oil companies upgrading Iraqi oil fields to lead the project, needed to boost crude oil production rates from Iraq's southern oil fields.

International oil companies have expressed willingness to set up the common water injection project, and include Russia's OAO Lukoil Holding (LUKOY), Italy's ENI SpA (E) and U.K.-Dutch oil major Royal Dutch Shell PLC (RDSA) which is expected to join it later, Nihad A. Moosa, head of the State Company for Oil Projects told Dow Jones Newswires late Tuesday.

"BPBP wants to start reimbursing the costs of the project when foreign firms increase output from these fields by 10%, while the ministry wants to pay back costs when they boost output by 20%," Moosa said.

However, a BPBP spokesman said that the U.K. supergiant "strongly supports the common seawater project, the terms for which are defined in the Rumaila Technical Service Contract", and that it is "working with ExxonMobil and the government of Iraq to move it forward."

BPBP is developing Iraq's largest oil field, Rumaila, near Basra which is producing around 1.3 million barrels a day. Under the service contract it signed with Baghdad in 2009, BPBP would start reimbursing its costs when it increases output from the field by 10%.
ExxonMobil, Shell, Eni and Lukoil have no problem with agreeing to the payment terms of the project, Moosa said.
Foreign companies had suggested the cost would be a little more than $3 billion to build the first stage of the project which is designed to produce 4 million barrels of water a day, she said.

"We rejected the proposed cost of the project as the ministry can build the project at half that price," she added.

The oil ministry is also considering another solution, namely hiring a separate company to build the project, Moosa said. The ministry has approached a company that has built similar projects in Saudi Arabia, she added, without naming the company.
The foreign firms are, however, "adjusting and reviewing their position" in order to address all these concerns and they reassured the ministry that they are still committed to the project, she added.
The water injection project aims to provide water to maintain reservoir pressure to fields such as, Rumaila, West Qurna Phase 1 and 2, Zubair and Majnoon in southern Iraq.
   
14-09-11 1258GMT