Page 18 - MEOG Annual Review 2021

MEOG AUGUST MEOG

Iraq approves BP’s

Rumaila spin-off plan

The Iraqi government has given BP and PetroChina the opportunity to
create a JV to hold their participations in Iraq’s most important oilfield.

IRAQ IRAQ this week approved plans by BP to spin claims of withdrawal from oil should be viewed
off its activities in the country into a new joint as a shift from direct to indirect involvement.
venture (JV) – Basra Energy Company Ltd – as
WHAT: the supermajor moves to distance itself from oil Output
Creating the JV will operations. Despite its desire to separate its Iraqi operations
allow BP to separate its Iraq Oil Minister Ihsan Abdul Jabbar told from the main company, BP has been in discus-
activities in the Iraqi oil local media that the Council of Ministers had sions with the Ministry of Oil (MoO) regarding
sector from the parent approved the formation of Basra Energy by BP an output increase at Rumaila.
company. and China National Petroleum Corp. (CNPC) In late 2020, talks were reported to be ongo-
subsidiary PetroChina to hold their combined ing in relation to plans to expand production to
WHY: 94% stake in the supergiant Rumaila oilfield and an agreed plateau of 2.1mn bpd from the 1.4mn
The company is operate the asset together with Basra Oil Co. bpd the asset averaged in 2020, accounting for
understood to have (BOC). The news confirms reports first pub- around a third of Iraqi output.
agreed to drill another lished by the Wall Street Journal in June. Speaking to S&P Global Platts at the time,
30 wells at Rumaila as Abdul Jabbar said that “the approval of the BP’s country head, Zaid Elyaseri, said: “There Rumaila well locations
Iraq seeks to ramp up Council of Ministers to establish the Basra is an ongoing discussion with the Ministry of
production. Energy aims for the company to be one of the Oil and BOC on how to proceed, given the low Source: BP
most important pillars of energy transformation oil price environment and the reduction in the
WHAT NEXT: and an important element of sustainable devel- activity set that the ministry has requested all
BP will remain involved in opment in Iraq”.
the field for now but given Following a 2014 renegotiation of the TSC
its strategic shift in focus shareholding, BP holds 47.63% in the Rumaila
towards cleaner forms of Operating Organisation (ROO), with Pet-
energy, it may look to sell roChina owning 46.37% and Iraq’s state oil
its share in the JV. marketer SOMO 6%. The original 20-year long-
term technical service contract (TSC), which
was awarded to the companies in 2009 as part
of Iraq’s first licensing round, was also extended
and now expires in 2034.
The TSC agreement set an original plateau
production target of 2.85mn barrels per day with
a maximum remuneration fee of $2 per barrel,
though this was reduced to 2.1mn bpd as part of
the 2014 negotiations.
Rumaila is believed to hold remaining com-
bined proven reserves and 2C resources of
around 14-15bn barrels of oil.
Abdul Jabbar added: “One of the most prom-
inent tasks of the company is that it will be the
party responsible for financing the giant Rumaila
field development project in southern Iraq”, with
BP confirming to Reuters that the JV would also
enable the partners to access “external financing”
to continue investing throughout the remaining
13 years of the TSC.
The move aligns with BP’s strategic pivot
towards cleaner energies and helps it reduce its
exposure to oil and gas; however, unless the com-
pany now moves to offload its stake in the JV, any

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