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Weatherford International has won a deal to build early production facilities at Iraq's untapped Garraf oil field in southern Iraq, a former Iraqi oil ministry official said Wednesday, according to a report from Dow Jones.

Adnan Galay, who retired as chairman of the field's joint management committee a few weeks ago, declined to give the value of the deal. However, contracting sources attending an Iraqi energy meeting in Istanbul said the contract is worth about $200 million.

Galay said that Lakeshore TolTest Corp will be a subcontractor to the project.

Weatherford was awarded the contract by the Malaysian company Petronas (45% stake) and its partners, Japan Petroleum Exploration (Japex) (30% stake), and Iraq's state South Oil Company (25% stake).

Petronas, which has been considering bid proposals since the late summer of 2010, chose Weatherford over three rival bidders--Petrofac with JGC, and Saipem with Punj Lloyd.

The giant oil services company earlier this year won a deal worth $52 million to drill 11 new wells in Garraf, located halfway between the southern cities of Karbala and Nasiriya in Thi Qar [Dhi Qar] governorate. The field was discovered in the 1980s by the then Iraqi oil ministry, and has oil reserves of 1 billion barrels.

Output from the field is expected to hit 50,000 barrels a day next year, 60,000 barrels a day in 2013 and 100,000 barrels a day in 2014, Galay said.

Garraf has an eventual output target of 230,000 barrels a day, although the Petronas-Japex partnership may increase production beyond that level, officials said.

"Three wells have been drilled to date, and testing oil proves that gravity ranges from 24 to 36 degrees API in the two reservoirs of the field," Galay said.

The Garraf early production work involves construction of a degasing facility with two trains of 50,000 barrels a day each, as well as storage tanks and infrastructure.

Weatherford earlier carried out the front-end engineering and design study at Garraf.

(Source: Dow Jones)

Petrofac, the international oil & gas facilities service provider, and China Petroleum Engineering & Construction Corporation (CPECC), the engineering and construction subsidiary of China National Petroleum Company (CNPC), have established a new strategic joint venture, China Petroleum Petrofac Engineering Services (CPPES). Based in Sharjah, UAE, the joint venture will provide project management and engineering services for selected oil & gas projects, focusing on projects for Chinese oil & gas companies.

Petrofac and CPECC have a long-standing relationship and track record of cooperation, most recently being jointly awarded an inspection, maintenance and repair contract for the Rumaila oil field in Southern Iraq. The strengthened relationship was recognised at an official ceremony that took place at CPECC's offices in Beijing on 19 September.

The joint venture which is 51% owned by CPECC and 49% owned by Petrofac, following formal signing and exchanging of contracts, will be established under the leadership of personnel from both companies.

Maroun Semaan, group chief operating officer, Petrofac, commented:

"Cementing our association with CPECC represents a significant milestone for Petrofac. Our relationship with CPECC extends over the last seven years and I am delighted it has been strengthened with the creation of this joint venture. Together, we have considerable resources and world-class engineering and construction expertise and our collaboration should enable us to capitalise on the significant opportunities in China and internationally."

Mr Hou Haojie, President, CPECC, commented:

"It is a delight that CPECC and Petrofac have come together to combine and harness their respective talents in order to deepen the portfolio in our local and international markets."

In its interim results for the first half of 2011, oil services company Petrofac gave the following update on its operations at Shell's Majnoon oilfield:

"In March 2011, we announced the award of our first contract in Iraq, a US$240 million engineering, procurement and construction management project with Shell. The Majnoon field in southern Iraq is one of Iraq's largest developments and we are delighted to be working with Shell to assist them with unlocking the field's potential.

"We are providing engineering, procurement, fabrication and construction management services for the development of a new early production system comprising two trains each with capacity for 50,000 barrels of oil per day, along with upgrading of existing brownfield facilities.

"Work on the project began in mid-2010 and is expected to complete during the fourth quarter of 2012."

(Source: Petrofac)

Update, RBC Capital Markets opinion: albeit the size of the contract is not material compared to Petrofac's backlog, we believe that any positive developments from Iraq should be seen as a positive step for Petrofac. This region becomes increasingly strategic, especially for the newly created Integrated Energy Services (IES). This contract award follows the EPC for the early production facility of the Shell-operated Majnoon field ($240m in March) demonstrating PFC's ability to build a presence in the country.

Petrofac, the international oil & gas facilities service provider, announces that BP Iraq NV (BP) has awarded Petrofac and its joint venture partner, China Petroleum Engineering & Construction Corporation (CPECC), an inspection, maintenance and repair contract worth US$90 million for the Rumaila oil field in Southern Iraq.

Petrofac's Offshore Engineering & Operations (OE&O) business will lead the one-year contract, which is effective from 28 June 2011, and is worth US$63 million to the group. Work will commence following a short transition and the scope of the contract covers rotating machinery, degassing stations and cluster stations. The project is being undertaken in partnership with CPECC, a company which has well established operations and infrastructure in Iraq. As part of the agreement Petrofac's staff will be based at CPECC's accommodation facilities in Rumaila.

Commenting on the award, Petrofac's group chief operating officer, Maroun Semaan, said: "We continue to be focused on our ongoing activities in Iraq and this most recent contract win demonstrates our strategic intent to grow the breadth and depth of our service delivery within the country. It also provides an excellent opportunity for us to establish closer relations with the BP Iraq team and to continue to develop our own in-country knowledge and presence."

Bill Dunnett, managing director, Petrofac OE&O added:

"We're delighted to be able to continue to support our existing customer, BP, in its onshore operations and to build on our relationship which started in the UK North Sea and developed more recently when we took over the operatorship of the Sajaa asset in Sharjah earlier this year. This contract will be run from our operating centre in Sharjah and we hope it will further establish our capability both in the country and the region to maximise any future opportunities."

The Rumaila oil field, discovered by BP in 1953, is located in Southern Iraq, 32km from the country's border with Kuwait.

Hermes Datacommunications Middle East, a key specialist providing Wide Area Network communications to the upstream oil and gas industry has won a contract to continue providing VSAT communications to support BP’s operations in Iraq. Hermes will continue supporting degassing stations, rigs and static life support camps.

Included in this contract renewal is additional bandwidth to the South and North Rumaila sites to offer load sharing, whilst also providing full redundancy across the BP Iraq network. Hermes will be using a separate satellite provider, Yamal 200 to ensure complete independence from their existing link.

Kevin Thorley, CEO, Middle East says:

“We are delighted by the BP contract win. We believe this renewal demonstrates not only our ability to more than satisfy our customers’ needs but also highlights our strengths as a key player in Iraq, as well as the rest of the Middle East markets. We look forward to continuing a strong and fruitful relationship with BP.”

To facilitate this win, Hermes has further increased the Middle East team to include a dedicated Account Manager and technical team. This expansion includes the move of one of Hermes’ top Engineers from their Head office in the UK, Vincent Davies.

Davies says, “I am thrilled to join the emerging Middle East team and to contribute towards the continuing success of the BP account”.

Davies brings with him a wealth of international experience including three and a half years as Project Engineer, Algeria. He has worked on some very significant client accounts including Petrofac, KBR, BP and Weatherford.

Reuters reports that Iraq and its partners, Russia's LUKoil and Norway's Statoil, have shortlisted five companies to compete for the West Qurna Phase Two oilfield development contract.

An Iraqi oil official who asked not to be identified said on Tuesday that the oil service companies selected are Saipem , SNC Lavalin Group Inc , Punj Lloyd Ltd , Globalstroy Engineering and South Korea's Samsung Engineering.

"We are studying the commercial offers and we expect to select a winning company within two weeks," the official said.

Last September, Iraq and its partners issued four tenders for construction and energy projects at West Qurna II, a 12.9-billion-barrel supergiant oilfield in southern Iraq.

The official said seven companies submitted bids, but that two, Petrofac Ltd and Technimont, were rejected. He did not offer any reason for their exclusion.

The four tenders are for the construction of an oil export pipeline; a tank farm at Tuba; a power distribution station and an associated gas processing plant; and an oil gathering system, central processing facilities and a water supply system.

The tenders are part of the initial development plan set by LUKOIL and Statoil and approved by Iraq's oil ministry last year to start production at the untapped oilfield.

They are expected to help production at the field hit 150,000 barrels of oil per day (bpd) in January 2013, the Iraqi oil official said.

West Qurna Phase Two operator LUKOIL is selecting one company to work on an Engineering, Procurements and Construction contract (EPC) for building oil facilities.

(Source: Reuters)

Petrofac, the international oil & gas facilities service provider, has confirmed it has been awarded a contract in excess of US$240 million by Shell Iraq Petroleum Development B.V. for developments in the Majnoon Field, Southern Iraq.

Under the competitively tendered contract, Petrofac is providing engineering, procurement, fabrication and construction management services for the development of a new early production system comprising two trains each with capacity for 50,000 barrels of oil per day, along with upgrading of existing brownfield facilities. Work on the project began in mid-2010 and is expected to complete during the fourth quarter of 2012.

Ayman Asfari, Petrofac group chief executive, said:

"Majnoon is one of Iraq's largest developments and we are delighted to be working with Shell to assist them with unlocking the field's potential. Iraq's geographic location, adjacent to many of our existing areas of operation, made it a natural market for the group as we continue to broaden our geographic footprint."

Subramanian Sarma, managing director, Petrofac Engineering & Construction adds:

"Prior to beginning work with Shell in Iraq last year, we had spent many months preparing in order to achieve a sufficient level of readiness across several aspects of our business operations. All of our activities are underpinned by our strong commitment to safety, quality and integrity and alongside Shell and the local community, we are working to deliver this project to the standards our customers and stakeholders expect from us."

PetroChina has invited seven contractors to submit the bidding documents for engineering, procurement and construction work on the first phase of development at the Halfaya oilfield in Iraq in the first week of 2011, the Norway-based energy newspaper Upstream has reported.

The report said the companies invited to participate in the tender include the UK-listed Petrofac, France's Technip, CH2M Hill of the U.S., China Petroleum Engineering Construction Company (CPECC), Daqing Engineering & Construction of China, and Malaysia's KNM and Malaysia Marine & Heavy Engineering.

According to the report, CPECC could have an upper hand over other bidders thanks to its status as PetroChina's sister company under the umbrella of China National Petroleum Corporation (CNPC).

Under the development and production service contract signed with Missan Oil Company in January of 2010, a PetroChina-led consortium aims to kick off production of 70,000 barrels per day from Halfaya in its first phase of commercial production.

PetroChina has a 37.5 percent stake in Halfaya, with 25 percent hel d by Iraqi's South Oil Company, 18.75 percent by Malaysia's Petronas and another 18.75 by French giant Total.

(Source: istock Analyst)

Following our recent reporting of Petrofac's (LSE: PFC) new business in Iraq's Majnoon oilfield, the company issued its half-year results this morning (Monday).

While the only reference to Iraqi business in the results was the following statement:

"In Iraq, we have commenced early stage engineering work for an International Oil Company which is expected to lead to a larger contract award during the second half of the year";

finance director Keith Roberts later told reporters:

"Iraq is going to be an enormous market for companies like us. There are estimates that the total spend on fields in Iraq could be as much as $200 billion (£129 billion) over the 10 years.

"We're now doing work for a major international oil company and are confident that it will turn into a fully approved contract.

"For us, being in there early, and getting a foot on the ground as well as experience of operating in Iraq positions us well for getting a piece of that very significant business."

Petrofac shares closed the day up 3.5% at 1410p.

(Sources: Petrofac, London Evening Standard)

More details are coming to light regarding Petrofac's new contract in Iraq, about which we reported last week.

Dow Jones reports that the two crude-oil processing plants will be at Iraq's super giant Majnoon oil field, which is run by Iraq's state-run South Oil Co., Royal Dutch Shell PLC (RDSA) and Malaysia's state-run Petronas, and that the project is expected to take 18 months.

There was reportedly no comment from a Petrofac official based in Sharjah.

Update, 23rd August:

In Petrofac's half-year results, published this morning, the only reference to Iraqi business was the following statement:

"In Iraq, we have commenced early stage engineering work for an International Oil Company which is expected to lead to a larger contract award during the second half of the year."