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UPDATE 3-CNPC, BP may alter stakes in Iraq oilfield-sources
July 24, 2009 / 11:12 AM / 8 years ago

UPDATE 3-CNPC, BP may alter stakes in Iraq oilfield-sources

* BP declines to comment on any changes in size of its stake

* Official says Iraq would need to approve any change

(Adds comment from Iraq official, paras 9-10)

By Chen Aizhu and Simon Webb

BEIJING/DUBAI, July 24 (Reuters) - China National Petroleum Corp [CNPET.UL] (CNPC) and Britain’s BP Plc (BP.L) may renegotiate the size of their stakes in a project to develop Rumaila, Iraq’s largest producing oilfield, industry sources said on Friday.

The BP-led group won the project to develop the southern Rumaila field in a bidding round at the end of June. BP’s current stake, according to industry sources, is 50 percent and CNPC’s 25 percent, while Iraq’s Southern Oil Company holds the rest.

A senior oil industry executive who works for a company that bid in the Iraqi auction last month said BP wanted to lower its exposure to risk in Iraq.

“I think BP still wants to be the operator of the field, even if it has a lower stake,” said the executive, who declined to be identified by name.

Iraq has the world’s third-largest proven oil reserves and the Rumaila field alone holds 17 billion barrels, more than the proven reserves in OPEC member Algeria. But BP accepted less favourable terms than it had wanted to get the contract.

Rumaila is the workhorse of Iraq’s oil industry with a current capacity of 1.1 million barrels per day (bpd), almost half of Iraq’s total output of 2.4 million bpd.

Earlier on Friday, industry sources said CNPC would take the majority stake from BP. [ID:nLO79853]

Toby Odone, a spokesman for London-based BP, declined to comment on any changes in the company’s stake, but he said BP was “moving towards finalisation of the contract”.

ONLY CONTRACT AWARDED

An Iraqi official said that any change in stakes could not happen without Iraqi approval and that BP and CNPC had not raised the matter in talks with the government.

“We had meetings with them on Wednesday and Thursday, and they mentioned nothing about a change in cooperation between them, and neither did they make any such indication,” said Abdul-Mahdy al-Ameedi, deputy director general of Iraq’s contracts and licensing directorate.

The contract for development of Iraq’s largest oilfield was the only one awarded out of eight that had been on offer.

Analysts say the Iraqi oil industry offers a unique opportunity to tap onshore oil reserves. Its petroleum industry has been devastated by years of war and international sanctions.

Fully publicly traded oil companies such as BP have to balance the benefit of gaining access to large oil reserves against the prospect of being exposed to more political and fiscal risk and diminished returns.

The original winner of the bidding for Rumaila, an Exxon Mobil-led (XOM.N) alliance, had rejected the Iraqi Oil Ministry’s maximum proposed per barrel fee for the contract, giving the BP group an opening to take it on.

A Chinese oil industry source said Chinese companies might have a cost edge over their Western counterparts.

To compensate for not very attractive terms, Chinese companies would be able to use their own service teams to develop the field to lower costs.

“Terms that are bad for BP are not necessarily bad for Chinese companies,” the source said. “CNPC has never seen a better field than this one.” (Additional reporting by Mohammed Abbas in Baghdad; writing by Alex Lawler and Christopher Johnson in London; editing by William Hardy)

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