Two deals have been sent to Iraq’s cabinet for ratification. It is unclear when the cabinet will ratify them. There are no guarantees that the contracts would be deemeed legal by future administrations, as there are still deep rifts among Iraqi politicians over control of oil wealth.
The potential increase in oil output from the three deals is around 4.5 million barrels per day (bpd), which would nearly triple Iraqi output to around 7 million bpd from around 2.5 million bpd. The increase is around 5 percent of global oil supply. It is enough oil to supply nearly a quarter of daily U.S. consumption, or more than half of China’s.
Iraqi oil deals specify that foreign oil firms should reach target production at the fields on offer no later than six years after contracts become effective.
Executives at companies involved say oil firms would want to boost output to target levels more quickly to make the deals more profitable.
Oil companies can begin recovering costs when output has risen 10 percent from the fields. That means they will move to achieve that 10 percent rise as quickly as possible, so Iraq could see a rise of around 150,000 bpd from the three fields in 18 months to 2 years.
Oil industry executives say the expense of hitting those smaller targets would be minimal.
BP (BP.L) and CNPC won the contract to boost output on the Rumaila field, Iraq’s largest, in June. Rumaila has reserves of nearly 17 billion barrels. Rumaila is the workhorse or Iraq’s oil industry, providing just over 1 million bpd of the country’s 2.5 million bpd output. BP has pledged to boost Rumaila’s output to 2.85 million bpd.
Eni (ENI.MI), Occidental (OXY.N) and KOGAS (036460.KS) have won a contract to develop the Zubair oilfield. Zubair has oil reserves of 4 billion barrels. Eni has pledged to boost output there to 1.125 million bpd from 195,000 bpd.
West Qurna has reserves of about 8.7 billion barrels, a little less than all the oil held by OPEC member Angola. Exxon and Shell have pledged to boost output there to 2.1 million bpd from around 280,000 bpd. LUKOIL and Conoco have set their sights on 1.5 million bpd.