UPDATE 2-Russia's Gazprom Neft sees Iraqi output start in spring

Wed Feb 5, 2014 9:34am EST

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By Katya Golubkova and Olesya Astakhova

MOSCOW, Feb 5 (Reuters) - Russia's Gazprom Neft plans to start commercial oil production in spring at its Badra oilfield in Iraq and hopes for an average output of 15,000 barrels per day (bpd) this year, a company official said on Wednesday.

Gazprom Neft, the oil arm of top Russian gas producer Gazprom, is targeting hydrocarbon production of 100 million tonnes of oil equivalent (2 million bpd) by 2020, up 60 percent from 62.2 million tonnes last year.

It earlier postponed initial production at Badra due to safety concerns and logistical problems.

"We plan to start production (at Badra) in spring ... the target of this year is to reach output of 15,000 barrels per day," Vadim Yakovlev, a first deputy chief executive of Gazprom Neft, told reporters.

Its output at Badra has been estimated to reach 170,000 bpd of crude oil by 2017.

Recent violence in Iraq, in part a spillover from neighbouring Syria, has increased concerns about security, even while the government is hoping that this year will bring the biggest annual rise in oil exports in a decade.

The oil field is located in the Wassit Province in eastern Iraq with an estimated 3 billion barrels of oil in place. The Russian company submitted a tender in December 2009 and signed a contract with the government in January 2010 to develop the field.

Since then, Gazprom Neft has had bumpy relations with the central Iraqi government over its plans to develop oil in the semi-autonomous Kurdistan region, where it has shares in the Garmian, Shakal and Halabja blocks.

Yakovlev said the company plans to announce a commercial discovery at Garmian and start test production at the block this year but declined to elaborate.

Kurdistan alone may produce up to 10 million tonnes of oil equivalent (200,000 barrels per day) at Gazprom Neft's projects by 2020, he said.

SHALE WITH SHELL

In Russia, a joint venture between Gazprom Neft and Royal Dutch Shell has secured licenses this year to start exploration at three hard-to-recover fields in the Bazhenov formation in the West Siberian region of Khanty Mansiisk, Yakovlev said.

Oil production from tight rock formations is needed to help keep Russia's output annual at over 10 million bpd, the world's largest.

Gazprom Neft and Shell have already started "fracking" for oil in Siberia as part of another joint venture.

Moscow has introduced tax breaks to encourage the development of Bazhenov and other shale deposits, which have led to drilling ventures with international majors such as ExxonMobil and Statoil.

Russian producers have so far reported recoverable crude oil reserves of 500 million tonnes, or 3.5 billion barrels, in Bazhenov.

Yakovlev also said the company would probably sell oil from Prirazlomnoye, Russia's first Arctic offshore oil deposit, at a discount to Urals and Brent benchmark blends due to its higher sulphur content and higher viscosity.

Prirazlomnoye, which has faced stiff resistance from green activists, is expected to produce 6,000 bpd this year and plateau at 120,000 bpd in 2021.

Gazprom Neft also banks on other Arctic fields to contribution to production.

Its Novoportovskoye onshore Arctic field is scheduled for commercial production at the end of 2015 or beginning of 2016 and reach with peak production of 5.5 million tonnes (110,000 bpd) in 2018, Yakovlev said.

He added that the peak production estimate might be revised upwards by the end of this year after additional exploration.

Novoportovskoye, previously expected to produce 120,000 to 180,000 bpd by 2020, has better oil characteristics by comparison with Prirazlomnoye and may become a new grade to feed refineries in northwest Europe. It is expected to trade at a premium to Brent.

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