BP, Iraq Differ On Costs Of Water Injection Project

Dow Jones reports that Iraq and BP have not yet reached agreement on reimbursement of costs to build a multi-billion-dollar oil field water injection scheme in southern Iraq.

ExxonMobil was chosen to lead the project on behalf of foreign oil companies rehabilitating Iraqi oil fields.

Nihad A. Moosa, head of the State Company for Oil Projects (SCOP) told Dow Jones Newswires that international oil companies (IOCs) interested in the common water injection project include Lukoil and Shell, which is expected to join later.

“BP 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.

But a BP spokesman said that it “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.”

BP is developing Rumaila oil field, Iraq’s largest, which is producing around 1.3 million barrels a day. Under the service contract it signed with Baghdad in 2009, BP 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.

(S0urce: Dow Jones)

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