Iraq, Oil Majors Agree to Restart Investment

Iraq, Oil Majors Agree to Restart InvestmentIraq, Oil Majors Agree to Restart Investment

Iraq has reached agreement with BP, Shell and Lukoil to restart stalled investment in oilfields the firms are developing, allowing projects that were halted this year to resume and crude production to increase in 2017, Iraqi oil officials said.

The agreements, reached in July and August, effectively delay to the second half of the year projects that the three companies had planned to carry out in the first half, which had been suspended because of low oil prices, Reuters reported.

As a result of the investment, Iraq's crude output should increase by 250,000-350,000 barrels per day next year, the Iraqi officials said. The country now produces about 4.6 million bpd, most of it from the southern region.

Iraq is OPEC's second biggest producer after Saudi Arabia, and the increase in its output, alongside that of Iran, could aggravate the global oil glut and complicate discussions between OPEC and non-OPEC producers on output limits to prop up prices.

According to documents seen by Reuters, all three firms agreed to spend in the second half of 2016 roughly half the budgets they proposed for 2015.

BP agreed to spend $1.8 billion this year at the Rumaila field it operates. It had initially agreed to spend $3.5 billion last year, which it later revised down to $2.5 billion.

Shell agreed to spend $742 million after proposing $1.5 billion last year. Lukoil would spend $1.08 billion, compared to $2.1 billion it had proposed last year.

Iraq has yet to reach agreements with Exxon, CNPC and Petronas on fields those firms are also developing in the south.

Oil companies helping Iraq develop its massive oilfields have to clear their spending with the government each year. They are then repaid with income from Iraq's exports of crude oil.