CNPC is only getting $2 a barrel for the oil it will lift from Iraq’s Rumaila field, but the low-ball price puts it and its partner BP into pole position among the world’s oil companies for reviving Iraq’s war-devastated oil industry. Iraq’s cabinet has just confirmed the oil ministry’s decision on Oct. 8th to award the BP-CNPC consortium the only contract offered in the country’s first international oil auction in more than three decades.
Other oil majors had refused to drop their opening bids. An ExxonMobil-led consortium stuck at $4.80 a barrel. But BP-CNPC dropped from its initial $3.99 a barrel, though $2 a barrel will barely clear production costs and the $15 billion of upfront investment needed. The Rumaila field now produces 1 million barrels a day. BP-CNPC aims to raise that to 2.85 million barrels a day, which will lift the country’s total oil production by four-fifths.
The deal put BP back into Iraq 10 years after Saddam Hussein threw it out. For CNPC it is a second deal. It signed a $3 billion agreement to develop the al-Ahdab oil field in the south that it had originally struck with Saddam in 1997 before other events intervened.
A second round of auctions is due in December. CNOOC and Sinopec, both failed bidders in the first round, are likely to take a second crack.