BP and CNPC in cut-price Iraq oil deal

AN ALLIANCE led by UK oil giant BP yesterday secured a six-year contract to develop Iraq’s biggest oil field, but had to agree to a fifty per cent cut in the fees it had been asking for.

In a consortium with China National Petroleum Corporation (CNPC), BP accepted a fee of $2 (£1.20) for each barrel it produces from the 17bn-barrel Rumaila oil field, compared to the $3.99 it initially proposed.

Iraqi authorities rejected an offer from an Exxon Mobil-led consortium, which had been seeking $4.80 for each barrel produced, paving the way for BP to bag the deal.

They also rejected an offer from China National Offshore Oil Corporation and Chinese group Sinopec, who wanted $25.40 per barrel extracted from the Maysan oil field. The government offered them just $2.30.

A key part of BP’s successful Rumaila bid was an ambitious promise to raise the field’s output to 2.85m barrels a day, from its current level of 1.1m, although the International Energy Agency on Monday said this was over-optimistic.

BP made no comment on the terms of the deal but said it and its partner were pleased to have participated in a “transparent and efficient process”.

The deal was the first between Iraq and a foreign oil giant since 1972, when the ruling Baath party nationalised the Iraq Petroleum Company. Seven years later Saddam Hussein took power.

Iraqi oil minister Hussein al-Shahristani said yesterday the six oil and two gas fields up for contract would add $1.7 trillion to government coffers over the next  20 years.

Barrels of Brent Crude oil are currently fetching prices around $73 on futures markets.