Iraq will soon finalize a large-scale, long-term deal for the development of oil fields in the South with Exxon and PetroChina. The 30-year contract will involve investments of US$53 billion and potential returns for Baghdad of as much as US$400 billion over its lifetime, Prime Minister Adel Abdul Mahdi told media this week.
The deal 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, from 125,000 bpd today.
“Talks now between the oil ministry and Exxon Mobil and PetroChina are focused on how to split profits if oil prices rise or decline,” Abdul Mahdi told Reuters in response to a question regarding a potential date for the finalization of the contract.
Iraq, OPEC’s second-largest oil exporter, has made no secret of its plans to considerably increase its oil production rates, despite the two OPEC+ production cut agreements, during which Iraq never really hit its allocated production quota. Raising production in the long term will be challenging, as an IHS Markit report from last year suggested, so the Exxon-PetroChina deal should be a very welcome development.
Iraq, the study noted, has a production capacity for 7 million bpd, but chances are its actual production will only grow marginally over the next decade, to about 5 million bpd, and not just because of the still difficult political and economic situation. Iraq’s oil industry has a purely technical problem: infrastructure and it is in this respect that the Exxon-PetroChina deal’s significance lies.