Wednesday, Jan 12, 2011

(This item was originally published Tuesday.) 


 
   By James Herron 
   Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--BP PLC (BP) said Tuesday it has passed a production milestone at Iraq's Rumaila oil field that means it will start to get paid for the huge amount of work it has done to lift output there.

BP only confirmed it has raised production by more than 10% above the initial level of 1.066 million barrels a day, but an Iraqi official said the Rumaila is now producing almost 20% more oil than before, or 1.275 million barrels a day.

For every extra barrel of oil production BP squeezes out of the field above the 10% milestone, it will receive a payment of $2, said a spokesman for the company. BP expects to receive the first payment of cash or an equivalent value of crude oil in March, he said.

"Reaching this production milestone is a great achievement and underlines BP's success in building its presence in the region," said Chief Executive Bob Dudley in a statement. "Increasing production at Rumaila, the world's fourth largest oilfield, has been a massive undertaking."

It was a "huge struggle" to turn around the previous natural decline in output from the depleted Rumaila field, said the BP spokesman. Twenty new rigs and 10,000 workers are mobilized in the field, drilling 41 wells and laying 122 kilometers of flowlines in 2010. BP has achieved it well within the three-year deadline set by the agreement signed with Iraq's South Oil Co. in November 2009, the spokesman said.

BP is working on Rumaila in partnership with PetroChina Co. Ltd. (PTR).

The Iraqi government has signed agreements with many major international oil companies to lift output at its largest oil fields, which have been neglected for decades due to lack of money and technology.

"We are hoping to reach a total of 3 million barrels a day by the end of 2011," Abdul Mahdy al-Ameedi, head of Iraq's Petroleum Contracts and Licensing Directorate, told Dow Jones Newswires last week.

Rumaila passed the 10% milestone on Dec. 25 according to BP, and Ameedi said production at the field has already reached 1.275 million barrels a day. He expects output from the field to hit 1.5 million barrels a day by the end of the year.

BP hopes to reach output of 2.85 million barrels a day from Rumaila one day, but the spokesman declined to give a target date.

Iraq, which sits atop one of the world's largest oil reserves, hopes to boost its production to 12 million barrels a day by 2017, although that is likely to be hampered by security problems and lack of infrastructure.

Analysts believe Iraq can realize no more than 6 million barrels a day in the next seven years.

-By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317; james.herron@dowjones.com

[Hassan Hafidh in Amman contributed to this article.]

(END) Dow Jones Newswires

12-01-11 0347GMT