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The Revival Of A $53 Billion Megaproject

Irina Slav

The Iraqi government is still in talks with Exxon about a megadeal worth US$53 billion over three decades, Iraqi media reported, quoting the Oil Ministry of the country. The deal could bring in some US$400 billion into Baghdad’s coffers over its lifetime.

The deal, involving PetroChina as partner of Exxon, has been in the making for four years and will involve the development of two oil fields in southern Iraq—Nahr Bin Umar and Artawi—and the construction of water supply infrastructure to southern fields in order to keep their production steady.

As a result of the project, the combined production of Nahr Bin Umar and Artawi should hit half a million barrels of oil daily, up from 125,000 bpd as of May this year. The two fields could also yield some 100 million cu ft of natural gas once the project is implemented.

Yet two months ago reports surfaced that the deal was under threat. Contractual disagreements and a worsening security situation in the country were among the reasons for the troubles.

Reuters quoted unnamed sources close to the developments as saying the bone of contention was the manner in which Exxon wanted to be compensated for the investments and the work. The supermajor apparently wanted a production-sharing stipulation, which Baghdad opposed on the grounds that it would be at odds with its rule to keep oil production state-owned.

Now, the Iraqi Oil Ministry’s statement made a note of saying that the delay in finalizing the deal did not mean it had fallen through or that Exxon has been excluded from the race.

Iraq has made no secret of its oil production ambitions despite the OPEC-wide cuts aimed at keeping prices relatively high. The country produces less than 5 million bpd at present but hopes, with the help of the megaproject, to boost this to 6.5 million bpd by 2022.

By Irina Slav for Oilprice.com

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