Iraq lowers Rumaila’s oil production target due to project’s complexity: BP executive

Iraq has lowered the production plateau target of its biggest oil field Rumaila to 1.7 million b/d from 2.1 million b/d owing to complexities associated with the project where BP and PetroChina are lead contractors, the head of BP Iraq told S&P Global Commodity Insights in a recent interview.

Rumaila currently produces around 1.4 million b/d, and partners in Rumaila Operating Organization are in talks with the oil ministry over the timeline for reaching the plateau target, Zaid Elyaseri said in a recent interview in Baghdad.

"Obviously, there have been discussions as to what should be the plateau rate for Rumaila," Elyaseri said.

"Initially, it was 2.1 million b/d in the contract but then the government decided to reduce it given the complexity and the pragmatism of developing the field over the remaining life of the asset," Elyaseri added.

BP and PetroChina are lead contractors for Rumaila under Basra Energy Company Limited, the new joint venture formed last year to represent their interests in the field and help secure external financing throughout the remaining period of the technical service contract expiring in 2034.

Rumaila Operating Organization, which includes BECL, state-owned Basrah Oil Co. and state oil marketer SOMO, remains the operator of the field.

Water injection

"BECL will play a key role in ensuring that ROO gets the right activity set, development plan and funding to reach the ultimate objectives throughout the technical service contract," Elyaseri said.

BP decided to spin off its interest in Rumaila into a new joint venture as the oil major seeks to limit exposure to high-carbon energy assets and focus on energy transition.

Iraq, which currently has an oil production capacity of around 5 million b/d, is seeking to boost the level to 8 million b/d, oil minister Ihsan Ismaael said previously. But he has given different timelines for reaching that target, which requires agreement with international oil companies who operate the country's biggest oil fields in southern Iraq.

Iraq pumped 4.39 million b/d in May, below its 4.461 million b/d OPEC+ quota, according to the latest Platts survey by S&P Global Commodity Insights.

The timeline for ramping up production at Rumaila has not been agreed yet, Elyaseri said.

"The assumption [of the timeline for reaching the plateau target] will change based on what the final decision is," Elyaseri said.

"The activity set (for field development) is massive, and personally, I would expect a much larger budget, as it will require a lot of infrastructure development, new facilities, additional activities that support water management."

The mega field needs a massive water injection program to help maintain reservoir pressure and boost its production, Elyaseri said.

"The field is 60-70 years old, so the reservoir pressure has dropped naturally, with the field producing for that long," Elyaseri added.

"To re-pressurize the reservoir, we need water injection -- the water injection program at RumaiIa is one of the largest in the world."

Gas flaring

Elyaseri did not disclose the field's recoverable oil due to reservoir modeling, but it is estimated to have some 17 billion barrels of recoverable oil, according to ROO's website.

As BP and its partners boost oil output at Rumaila, associated gas production is expected to increase.

Some of the gas produced at Rumaila is used by a power plant and the excess is sent to Basra Gas Co., a joint venture with Shell, state-owned South Gas Co. and Mitsubishi, which captures gas from Rumaila, Zubair and West Qurna 1 fields in southern Iraq.

However, some gas is still flared.

"ROO is working with partners and other operators [notably the Basra Gas Company] to reduce flaring and venting during operations at Rumaila," Elyaseri said.

Iraq is the world's second-worst gas flaring nation after Russia, according to the World Bank.

Despite its carbon intensity, low production costs at Rumaila make it attractive.

The cost per barrel "is very low and efficient just under $5/barrel, making it an extremely resilient hydrocarbon resource; perhaps, one of the lowest costs of barrels you can find in the world."