Reuters reports that the Chief Executive of Weathford International, one of the largest suppliers of goods and services to oil companies, said the oil services industry needed more consolidation.

Weatherford is currently operating in Iraq’s al-Bazerkan oilfield in Amara.

“We need to get larger,” said Bernard Duroc-Danner, citing the fact that oil services companies face large challenges in Iraq and in shale gas, which will require larger players.

While the industry had seen a number of deals in recent years, he added: “There’s more to come”.

(Source: Reuters)

U.S. firm Weatherford embarked on drilling a new oil well in eastern al-Amara city on Sunday, as part of a $224 million [262 billion Iraqi dinars] deal to drill 20 wells in 0rder to increase oil production, said Missan Oil Company’s information director.

“Weatherford started drilling the new well in the al-Bazrakan oilfield, (70 km) eastern Amara,” Ali Abbas al-Tarfi told Aswat al-Iraq news agency.

“The step is the first in a deal to drill 20 oil wells to increase the productivity of the province’s oilfields that now yield 100,000 barrels per day,” he added.

Tarfi noted that the production capacity for each well will be ranging between 20,000 and 30,000 bpd.

“The investment contract concluded with the company requires the wells to be drilled within 31 months,” he said.

Missan is home to six productive oilfields – al-Bazrakan, Abi Gharb, al-Fokka, al-Halfaya, al-Amara and the Majnoon filed that is shared with the South Oil company.

The province also has five explored non-productive oilfields – al-Huwayza, al-Rafie, Rafidain al-Sharqi, al-Dujaila and Kemit.

One of the largest oilfield services companies, Weatherford operates in more than 100 countries and employs more than 50,000 people worldwide. With a product and service portfolio that spans the life cycle of a well – drilling, evaluation, completion, production and intervention – and a robust research and development effort, the company is well positioned to meet the ever-evolving needs of the oil and gas industry.

(Source: Aswat al-Iraq)

Related articles:

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• Special Equipment to Dig 20 Oil Wells Arrives in Amara
• Rumaila Drilling Spree

Italian oil major Eni is expected to award a tender to drill more than 100 new oil wells at its Zubair oil field in southern Iraq in August, according to a report from Dow Jones.

“We received the bids and we are in the process of assessing them,” an executive told the news agency.

Several well-known oil services companies submitted offers, including Weatherford International Ltd (WFT), Schlumberger AS (SLBS.VI) and Egyptian General Petroleum Corp. among others, the executive said. The wells will be drilled over three years.

On Tuesday ENI reported that it will be “[reinforcing] the cooperation between Eni, the [Egyptian] Ministry of Petroleum, and the two Egyptian state oil and gas companies, EGPC and EGAS“.

Earlier in June, Eni said it would drill 12 new wells and ‘overwork’ five others this year to boost output by 10%, according to its initial plan. The field, with 6.5 billion barrels of proven oil reserves, is currently producing 183,000 barrels a day.

Eni, in partnership with Occidental Petroleum Corp. and Korea Gas Corp. (Kogas), set a plateau target of 1.2 million bpd for Zubair to be reached in 2016.

The consortium won the right to develop the field at Iraq’s first postwar licensing auction last year. The license for the field wasn’t awarded at the auction in June, but a deal was reached in January this year following subsequent negotiations.

Eni has a 32.81% stake in the venture, while Occidental holds a 23.44% stake, Kogas 18.75% and Iraq’s state-run Missan Oil Co. holds the remaining 25%.

(Sources: Dow Jones, ENI)

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Special equipment to dig 20 oil wells arrived in the al-Bazerkan oilfield in Amara, according to the media director of the Missan Oil Company.

“U.S. oilfield services company, Weatherford (WFT.N) sent equipment to the oilfield to start digging 20 wells, 70 km east of Amara,” Ali Abbas told Aswat al-Iraq news agency.

“The project will contribute to raising the production capacity of the company,” he explained.

“The production capacity of each well ranges from 20 to 30 thousand barrels daily and the investment contract concluded with the company stipulates digging the wells within 31 months at a cost of $224 million,” Engineer Walied Khaled, representing the U.S. company, told Aswat al-Iraq news agency.

Iraq has opened the doors to foreign oil companies through two bidding rounds for oilfield servicing contracts, and has also invited specific foreign firms to compete for development contracts in others.

Iraq needs foreign companies to invest in drilling more oil wells as it does not have the capacity on its own to more than double output of 2.3-2.4 million barrels per day of crude, its oil minister has said.

Iraq, which plans to raise its oil output capacity to 6 million bpd in five-six years, holds the world’s third-largest proven oil reserves, but its fields are largely underexploited due to decades of war, sanctions and underinvestment.

(Source: Aswat al-Iraq)

Shell and its Iraqi state partner are in the process of awarding a deal to drill new oil wells at the super giant Majnoon oil field in southern Iraq, the head of Iraq’s state-run South Oil Co., Dhiaa Jaafar, said on Tuesday.

Dow Jones reports that Shell, which partnered Malaysia’s state-run Petronas to develop Majnoon, will also award engineering, procurement and construction contracts to build various production installations at the field, an Iraqi oil industry source familiar with the project said.

Jaafar told Dow Jones Newswires that both deals have not yet been awarded but they are “in process.” He gave no further details.

Separately, an Iraqi oil industry source said that firms including Halliburton, Weatherford International, and Petrofac have been invited to submit bids for these two tenders.

A Shell executive contacted by Dow Jones refused to comment.

Shell said earlier that it was planning to drill 15 new wells over the next two years at Majnoon. This would help lift production to 175,000 barrels a day by 2012 from the current level of 45,000 barrels a day.

The Anglo-Dutch giant and Petronas were awarded a contract in December to develop the Majnoon field, which is located in Basra governorate and holds some 12.6 billion barrels of proven oil reserves. Shell owns 45% of the venture and Petronas 30%, with Iraq’s state-run Missan Oil holding 25%.

Halliburton and Weatherford are already involved in oil services projects in southern Iraq. Petrofac said last month that it was establishing a presence in Iraq as it moves to increase its massive order book of projects.

World oil companies are moving ahead with development work at oil fields despite a political vacuum in Iraq after a general election in March produced no outright winner and raised concerns about increased violence in the country. U.S. Vice President Joe Biden concluded a visit to Baghdad on Monday, trying to mediate a solution among the various political blocs.

Shell is still keen to capture and sell gas in Iraq. As we reported last week, the Iraqi cabinet last week ratified a $12.5 billion deal with Shell and Mitsubishi to develop a gas-structure project in southern Iraq, paving the way for a final signature of the deal.

Iraqi officials said that the venture could produce up to 2.5 billion cubic feet a day when the project is developed.

Shell also partnered with ExxonMobil won a deal to develop the prized West Qurna Phase 1 oil field in southern Iraq. ExxonMobil holds the majority stake in that field.

(Source: Dow Jones)

The world’s biggest oilfield contractors are building bases in the deserts of Iraq in a bet they’ll profit as the country strives to boost crude oil output to rival Saudi Arabia.

Schlumberger Ltd., Halliburton Co. and Baker Hughes Inc. are among companies this past week that said they’re expanding operations in Iraq. Weatherford International Ltd., the fourth- largest oilfield-services provider by market value, will expand staff in Iraq to more than 1,000 by July, Chief Executive Officer Bernard Duroc-Danner told investors yesterday on a conference call.

The prize is a share of the billions of dollars to be spent as the war-torn country seeks within seven years to increase crude-oil production capacity to 12 million barrels a day, on a par with the world’s largest oil exporter, Saudi Arabia. Iraq’s current production is about 2.4 million.

“It’s all becoming more real, in that contract awards are getting closer,” said Jeff Tillery, an analyst at investment bank Tudor, Pickering, Holt & Co. in Houston. “It’s a big opportunity for these guys.” Revenue potential is high, he said. “The profit side is a little bit of a leap of faith.”

The risks are financial, legal and political. Contractors don’t yet have a firm grip on what costs might be, Duroc-Danner said. Last month’s parliamentary elections left no political party with enough seats to govern alone, and Iraq doesn’t have a law yet for how oil revenue will be distributed.

Second-Biggest Field

Iraq’s government has signed 10 contracts for oilfield development with London-based BP Plc, Exxon Mobil Corp. and other producers.

BP, which is leading development of Iraq’s biggest oil field, known as Rumaila, awarded $500 million in service contracts last month. Included were projects won by Geneva-based Weatherford and a partnership between Schlumberger, based in Houston and Paris, and state-owned Iraqi Drilling Co.

Rumaila may become the second-biggest oil field by production in the world, BP said earlier this year. Saudi Arabia’s Ghawar field is the largest.

Halliburton, which plans to invest $100 million in Iraq this year, said it’s in the process of securing its first major base in Iraq.

‘Plenty of Work’

“There’s going to be plenty of work in Iraq, and believe me, all the service companies will have opportunities there,” David Lesar, chief executive officer at Houston-based Halliburton, said on an April 19 conference call with investors. “So we’re going along at the pace we want, and we’re confident we’re going to be successful.”

Schlumberger’s base will have 300 people this year, and that number will double by early 2011, CEO Andrew Gould said last month.

“Competition will be fierce, start-up costs high, and we do not expect significant revenue before 2011,” Gould said at the Howard Weil Energy Conference in New Orleans. “The significance of Iraq will only really emerge once the post- election political landscape is understood and some form of oil law has been passed.”

Development of Iraq’s oil industry is moving ahead as security improves after decades of wars and sanctions.

Al-Qaeda

U.S. and Iraqi forces said yesterday that they killed two of al-Qaeda’s regional chiefs in raids. A day earlier, Prime Minister Nouri al-Maliki said Iraqi and U.S. forces killed the terror network’s two principal leaders in the country. “Iraq is probably the biggest opportunity, along with possibly Brazil, confronting the oil-services industry,” said James D. Crandell, an analyst at Barclays Capital in New York. “It’s a country that has a significantly higher capability of exporting crude oil, but it needs a lot of work done on its fields.”

Within five years, service providers may be competing for more than $5 billion annually in contracts, he said.

The four biggest oilfield contractors all rose 4 percent or more yesterday on the New York Stock Exchange. Schlumberger gained 17 cents to $68.02 today, and Halliburton fell 2 cents to $33.29. Baker Hughes climbed 60 cents to $50.89, and Weatherford dropped 59 cents to $16.62.

‘Surge’ coming

if anything, service companies are late in positioning themselves for the “upcoming surge” in oil contracts, said Nansen Saleri, CEO at Quantum Reservoir Impact in Houston and former reservoir-management chief at Saudi Arabia’s state oil company. “Iraq is pregnant for huge growth,” Saleri said yesterday.

The country has potential reserves of 200 billion to 300 billion barrels of oil, Saleri said, and “the early movers will be the big winners.”

“It presents a tremendous opportunity for the service companies,” Gene Shiels, a spokesman for Houston-based Baker Hughes, said yesterday.

All of the companies said investors shouldn’t be quick to judge results from their Iraq forays.

“It’s going to be a very expensive place to operate, at least initially, because you’ve got all your mobilization costs, you’ve got people you’ve hired, bases that you’ve built,” Shiels said. “It’s going to take some time.”

28 April 2010 - Bloomberg

BP Plc will be paid in crude for its investment costs in an Iraqi contract that offers about the same rate of return as other projects worldwide, Chief Executive Officer Tony Hayward said.

BP and China National Petroleum Corp. are spending about $15 billion in Rumaila, Iraq’s largest oil deposit, pledging to more than double production to at least 2.85 million barrels a day in the second half of this decade. Hayward predicted the company will reach an initial goal of raising output 10 percent in the next 18 months.

“We think the terms are perfectly good terms that will allow us to earn returns commensurate with returns elsewhere in our portfolio,” Hayward said yesterday at a briefing for reporters. “The cost of developing this oil is very low.”

The deal that BP and CNPC reached with Iraq’s government last year pays the companies’ costs plus a service fee of $2 a barrel, a rate that some analysts say doesn’t offer sufficient rewards given security concerns and the risk of political instability in Iraq.

“The nature of the contract is that after the first increment of 100,000 barrels a day has been achieved, then we go immediately into cost recovery,” Hayward said, speaking from Washington. “At that stage, essentially every dollar that goes in comes out in the same year.”

Base Production

BP and CNPC agreed to a base production for Rumaila of 1.066 million barrels a day. After the initial target of increasing output by 100,000 barrels day, the oil companies promised to boost output to 2.85 million barrels a day. BP’s head of production Andy Inglis has said Rumaila may become the world’s second-largest field by 2015.

BP and CNPC awarded $500 million of oilfield services contracts last month for Rumaila to Schlumberger Ltd., Weatherford International Ltd., Iraqi Drilling Co. and China’s Daqing Drilling. BP said it is building from the operation it inherited at the field.

“We benefit enormously from the fact that we inherit a going concern,” Hayward said.

21 April 2010 - Houston Chronicle

As oil and gas operators ramp up service contract offerings in Iraq to begin developing the country’s vast, war-ravaged oil reserves, Weatherford Chief Executive Bernard Duroc-Danner said Tuesday in a conference call with analysts, the company has established nine rigs operating on the ground in Iraq with 1,000 employees who would begin work by July.

The Swiss-based oil field services company reported Tuesday a loss of $40 million for the first quarter, or 5 cents a share, compared with income of $164.8 million, or 24 cents a share, a year earlier.

The loss was largely due to the devaluation of Venezuelan currency and a $38 million charge related to a supplemental executive retirement plan.

Revenue increased 4 percent to $2.33 billion, compared with $2.26 billion in the same period a year ago, thanks to improvement in its North American markets.

Weatherford, which has about 2,500 employees in Houston, said revenue from its North America market increased 6 percent to $891  million, compared with a year ago. Versus the fourth quarter, revenue rose 21 percent, in tandem with the rising rig count on the continent.