Page 10 - MEOG Week 47

MEOG PROJECTS & COMPANIES MEOG

Chinese firms eye Exxon’s

stake in West Qurna-1

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

P10 www. NEWSBASE .com Week 47 25•November•2020