January 29, 2013 / 3:50 PM / in 5 years

UPDATE 1-Iraq, Eni in talks to cut Zubair output to 1 mln bpd

* Eni targets 1 mln bpd from 1.2 mln bpd

* Shell in final talks to cut Majnoon output to 1.2 mln bpd

* Bad weather, Rumaila maintenance lower oil exports from the south

By Aref Mohammed

BASRA, Iraq, Jan 29 (Reuters) - A group led by Italy’s Eni is in final talks with Iraq to cut the production target of Zubair oilfield to 1 million barrels per day (bpd) from 1.2 million bpd, as the OPEC nation looks to set a more realistic national output goal.

Iraq also is close to a final deal with Royal Dutch Shell to cut the final production target of Majnoon oilfield to 1.2 million bpd from 1.8 million bpd, head of the state-run South Oil Co., Dhiya Jaffar told Reuters on Tuesday.

A lower production target suits Baghdad, officials say, because it worries that adhering to the existing agreements would deplete more than 50 percent of its proven reserves over the life of the 20-year agreements.

The OPEC member’s oil exports from its southern oilfields are at 2.084 million barrels per day so far, higher than the 2.02 million bpd exported last month, he said.

“We have maintenance operations at Rumaila oilfield which caused an exports cut of around 80,000 barrels per day,” Jaffar said.

Iraq’s rigid service contracts initially committed foreign firms to boosting capacity beyond 12 million bpd by 2017, but this target proved unreachable due to widely flagged infrastructure bottlenecks and logistical shortcomings.

Eni, U.S.-based Occidental Petroleum Corp and South Korea’s KOGAS signed a 20-year deal with Iraq in 2010 to develop Zubair, whose production is currently at around 270,000 barrels per day. The consortium is expecting to invest $18 billion in the Zubair oilfield.

The first output cut deal was signed this month between Iraq and LUKOIL, revising final production target from West Qurna 2 oilfield to 1.2 million bpd, lower from an original 1.8 million bpd.

Shell is expected to be the second oil company after Russia’s Lukoil to sign a final deal to cut the output target of Majnoon oilfield, Jaffar said.

“The more advanced talks so far are with Shell to cut Majnoon output target to around 1.2 million barrels, a little more or less,” said Dhiya Jaffar.

Royal Dutch Shell last year started talks with Iraq to slash its production target at Majnoon oilfield, the first company to begin negotiations with the government to scale back output goals.

Shell has spent around $1 billion since taking over the field in 2010, and planned to invest another $1 billion in 2012. Total spending over the life of the 20-year project was estimated to be around $50 billion.

Iraq and British BP are also in talks to cut the final production target of Rumaila oilfield, but no specific figures have been agreed yet, Jaffar said.

Iraq has signed multi-billion dollar deals with several international oil companies, including Shell, Exxon and BP, to develop fields in the south, where most of its crude is pumped.

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