BP starts getting payment for Iraq oil investment

Wednesday, May 18, 2011 20:30 GMT

LONDON: BP Plc has started to receive payment for the millions of dollars it has invested in Iraq with the loading of its first shipment of Iraqi oil last week, industry sources said Tuesday.

London-based BP and its Chinese partner CNPC have been developing the Rumaila field, which pumps almost half of Iraq’s output, as part of the OPEC member’s ambitious plans to expand its oil industry.

BP and CNPC are owed more than $1 billion for work at Rumaila over the past year or so, where production has been increasing.

On Saturday, the tanker Oceanis sailed from Basra Oil Terminal in southern Iraq carrying 2 million barrels of crude for BP, a shipping agent said. The cargo of Basra Light oil is worth at least $200 million at current prices.

“This is the first cargo that Iraq has allocated to pay for the oil service contracts that were signed a couple of years ago,” an industry source said.

At Rumaila the companies have drilled new wells, overhauled and connected existing ones and installed electric submersible pumps to boost production at the field, which holds an estimated 17 billion barrels of oil reserves.

“Production is running at close to 1.2 million barrels per day (bpd) at Rumaila, at least 100,000 bpd more than when the companies took on the service contract to increase flows at the field,” the industry source said.

Service contracts awarded to foreign oil companies stipulate they start to be paid and to recover costs once they boost production by 10 percent above agreed baselines.

Boosting output at Rumaila, which BP helped to discover in 1953 and where output has fallen from its 1980 peak of 1.6 million bpd due to years of war and sanctions, is not without its challenges.

Official Iraqi figures obtained by Reuters in March showed that production had fallen from peaks hit in December and early January, in what could be a sign of challenges ahead.

Iraq has allocated another crude cargo to CNPC, and BP will probably receive a second later in May or in early June, the industry source said.

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