Page 13 - MEOG Week 44 2021

MEOG PROJECTS & COMPANIES MEOG

Halliburton in talks to

replace Exxon at West Qurna

IRAQ IRAQ’S state-owned Basra Oil Co. (BOC) this (TSC) signed in 2010. It is worth noting that the
week said that US services specialist Hallibur- WQ-1 TSC also does not cover gas production,
ton has expressed its interest in replacing fellow with China Petroleum Engineering & Construc-
American firm ExxonMobil in the contract to tion Corp. (CPECC) awarded a $121mn deal in
develop the West Qurna-1 (WQ-1) oilfield. late 2019 to upgrade facilities and increase the
Baghdad has been holding talks with numer- capture of flare gas at the field.
ous parties since Exxon announced its intention Data from Wood Mackenzie estimates
to withdraw from the project early this year. that gross 2021 revenues from WQ-1 will be
The US firm had apparently been in talks $5.03bn, with the state’s take amounting to
with state-owned China National Petroleum $4.12bn through a combination of taxes and
Corp. (CNPC) and China National Offshore Oil royalties, based on a capital expenditure of $5.44
Co. (CNOOC) for the sale of its operated 32.7% per barrel.
stake in WQ-1. West Qurna-2 forms the larger, southern
This was turned down by BOC, with a source development project to tap the broader deposit,
close to proceedings telling Middle East Oil & for which Lukoil receives a per barrel fee of just
Gas (MEOG) that the Iraqi government did not $1.15. These fees compare with up to $6 per bar-
want the country’s upstream to be “dominated by rel at other fields and ExxonMobil has been reti-
Chinese companies”. cent about increasing its exposure to the project.
The company has divested nearly half of its A source close to the deal told MEOG that
original 60% and is partnered by China’s Pet- the Ministry of Oil (MoO) had tried several
roChina (32.7%), Japan’s Itochu (19.6%), Per- approaches to placate Exxon, whose concerns
tamina (10%) and state-owned Basra Oil Co about the field stem from challenges imple-
(BOC, 5%). menting the Common Seawater Supply Facility
The company promised to divest $15bn (CSSF), which will now be completed by France’s
worth of assets during 2019-2021, but only sold TotalEnergies.
off $1bn worth of assets in 2020. Earlier this “Iraqi authorities now regret that they didn’t
year it sold its 32% stake in the 324-square km give the project to ExxonMobil – They made
Baeshiqa licence in Iraqi Kurdistan to Norway’s Exxon’s life difficult and the difference in dis-
DNO. cussions was only $2bn,” the source said. Bagh-
WQ-1 has capacity to produce 500,000 bar- dad “didn’t want to go to arbitration. We asked
rels per day (bpd) of oil from remaining com- what kind of economic model [Exxon wanted]
bined oil and condensate reserves of more than to make this work. They said they just want to
22bn barrels in the northern portion of the leave,” he added.
broader West Qurna deposit. He noted, though, that the terms of the WQ-1
The developers are paid a maximum of just contract transfer are unclear, given that Exxon’s
$1.9 per barrel of oil produced from the asset – contract does not give it rights “to the resale of
less than $1.2 per barrel after deduction of taxes the contract – it only specifies compensation for
– under a 20-year technical services contract a loss of investment”.™

Week 44 03•November•2021 www. NEWSBASE .com P13