Iraq Pays BP for Rumaila Production

BP lifted its first cargo of Basra light crude from Rumaila this week, according to a report in the Telegraph. The cargo is worth about $200m [240 billion Iraq dinars].

The company is working with China National Petroleum Corporation (CNPC) on the field and the two companies are due $1bn for boosting production, drilling new wells and improving operations over the past year.

They have managed to increase production at Rumaila by 10pc more than expected. After a year of work, output is now running at about 1.2m barrels per day – 100,000 barrels ahead of the earlier output.

Rumaila once produced 1.6m barrels, but it has been neglected during years of war and sanctions.

(Source: The Telegraph)

2 Responses to Iraq Pays BP for Rumaila Production

  1. Re da Caste May 18, 2011 at 11:12 pm #

    It is a great shame these oil payments take that very long time before they are done! Typically the big ones, such as BP, are paid first, while the small oil companies are still waiting for their share. No one can live on the future – it cost a lot to run the business!

  2. Ahmed Mousa Jiyad May 19, 2011 at 8:52 am #

    THE BALANCE-SHEET IS STILL NEEDED

    This payment to BP/CNPC pertaining to Rumaila oilfield service contract substantiates what I, and many others, had asserted many times that IOCs do not need to earmark the double digits $ billions of investment upfront. Rather, they recycle the revenues they receive from the Iraqi side once the company attains (and should maintain the 10% threshold of incremental production)

    That said, and for transparency sake the Ministry of Oil, SOC, and SOMO are expected to provide the full balance sheet regarding this payment, specifically:
    1- How much BP/CNPC had actually spent last year in both capex and opex compared with the planed budget for 2010 work program as approved by the JMC;
    2- What was the “spot price” of the Rumaila crude on the day of actual lifting of each particular shipments;
    3- Was the actual payment in conformity with the “caps on the deemed revenues” mechanism of the contract and under which R-factor value?
    4- The distribution of the actual “payment” to BP, CNPC and SOMO (the State partner), income taxes as per the contact.
    5- Explain the actual used formula for “valuation of Rumaila crude” at the delivery point and FOB as per the signed contract.
    6- Was BP/CNPC took part in the valuation of Rumaila crude referred to above or the valuation was done solely by SOMO and confirmed by MoO, and finally;
    7- Since “Rumaila is producing between 1.1 million barrels per day (bpd) and 1.2 million bpd now, down from the peak of about 1.3 million bpd earlier this year”, then the 10% threshold was not sustained. According to the contract BP/CNPC should not be entitled to payment as long as the incremental production is lower than that threshold.

    Ahmed Mousa Jiyad,
    Iraq/ Development Consultancy and Research (I/DC&R)
    Norway.
    [email protected]

    19 May 2011