Page 8 - AsianOil Week 47

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Chinese firms eye Exxon’s

stake in giant Iraqi field

FINANCE & STATE-OWNED China National Petroleum
INVESTMENT Corp. (CNPC) and China National Offshore Oil
Co. (CNOOC) are reported to be interested in
buying ExxonMobil’s 34.7% stake in Iraq’s giant
West Qurna-1 (WQ1) oilfield.
The news follows the departure of Royal
Dutch Shell from WQ1 and Majnoon within the
last few years as Western companies reduce their
exposure to Iraq. Shell sold its 20% stake in WQ1
to Japan’s Itochu, and the shareholder makeup
is illustrative of the growing role of Asian firms
in the Iraqi upstream, with Malaysia’s Pertamina
and PetroChina both holding sizeable stakes.
Speaking to Bloomberg, sources said that no
final decisions had yet been made and with geo- Meanwhile, CNPC subsidiary China Petro-
political risks posing uncertainties, there was no leum Engineering & Construction Corp.
guarantee the deliberations would lead to a deal. (CPECC) was awarded a $121mn engineering
The news casts further doubt on the fate of contract for upgrade work at the field. The scope
the long-awaited Common Seawater Supply of this work included upgrading gas extraction
Project (CSSP), which Oil Minister Ihsan Abdul facilities, with work due to be completed within
Jabbar said in October had been pushed back 27 months, with a view to raising output from
even further. the asset and reducing flared gas.
In May last year, discussions about the WQ1 produces around 480,000 bpd of oil
long-delayed project between the Ministry of Oil reserves of around 9bn barrels. The developers of
(MoO) and Exxon broke down, with a $2.4bn WQ1 are paid a maximum of just $1.90 per barrel
package for the development awarded to Hyun- of oil produced from the asset, as against up to $6
dai Engineering & Construction the following per barrel at other fields, and the IOCs have so far
month. Hyundai’s pricing for the project was baulked at increasing their exposure to the field.
reported to have come in lower than that of the As reported by Middle East Oil & Gas (MEOG)
US super-major. in December last year, CNPC has taken the longer-
The CSSP is designed to take seawater from term view that by increasing its involvement in
the Gulf, treat it and then pipe it to major south- smaller work at the field, it has set the stage for tak-
ern oilfields, where it will be injected to increase ing a larger slice of the asset further down the line,
pressure in oil wells. With this key to Iraqi efforts particularly if ExxonMobil grows tired of the low
to increase oil production, the importance of the returns from developing WQ1.
CSSP to the expansion of Iraqi oil production is China’s involvement in the Iraqi oil and gas
paramount. industry is unsurprising, given that the country
While gains have been made to achieve the is Baghdad’s biggest oil customer. In 2018, 10
current 4.8mn barrel per day output level, with- Chinese firms, including state-owned China
out the CSSP it is unclear how Baghdad will National United Oil Corp. (Chinaoil) and Uni-
achieve the 2mn bpd increase Jabbar spoke of pec, bought 900,000 bpd. During the first nine
last month when he targeted a production capac- months of 2019, China’s total crude imports
ity of 7mn bpd by 2027. from Iraq amounted to 256.6mn barrels (940,000
bpd), with the volume rising to 300.53mn barrels
(1.1mn bpd) during the same period this year.
In 2018, Iraq’s State Organization for the Market-
ing of Oil (SOMO) also launched a joint oil trading
platform with China’s Zhenhua Oil Co; however,
this and the similar set-up with Russia’s Litasco were
scrapped, with Baghdad feeling that it had learnt suf-
ficiently from these ventures to go it alone.
Following the growing interest of Russian
companies throughout Iraq, including in West
Qurna-2, Badra, Anbar Province and the Kurd-
istan Region, it is perhaps unsurprising to see
Beijing doing “whatever it takes” to ensure that
its companies retain a slice of the country’s mas-
sive oil and gas pie.™

P8 www. NEWSBASE .com Week 47 26•November•2020