West Qurna field (Phase 1)

The 'super giant' West Qurna oil field in southern Iraq is located in Basra governorate. The field comprises of two separate license areas, Phase 1 and Phase 2, defined by the Euphrates river which runs west-east across the centre of the field.

The West Qurna field is located around 50 kilometres (km) north-west of the city of Basra. Overlapping the northern edge of the Rumaila field, West Qurna can be regarded geologically as a structural extension of North Rumaila, but was designated a separate field for non-technical reasons. It is considered a separate asset for development.

Contract Negotiations
West Qurna Phase 1 was awarded to a consortium led by ExxonMobil in November 2009, several months after the government had declined to award the contract area to any of the bids received during the first round of competitive bidding. At the original offering in July 2009 the bids specified a remuneration fee in excess of the maximum fee of $1.90 set by the Ministry of Oil. The Exxon-led consortium proposed a remuneration fee of $4, which was then revised to $3.70 as part of an 'additional bid', which was also turned down.

However later in the year an ExxonMobil-led consortium finally entered into a twenty-year venture to develop the field. Under the deal, the stakes were split as follows: ExxonMobil (60%), Shell (15%) and the Iraqi state (25%). Under the contract, the companies were to be paid a fee of $1.90 a barrel for the oil they produce at the site. Analyst Samuel Ciszuk commented that the deal was "a big loss for Lukoil” which did work on West Qurna when Saddam Hussein ruled Iraq and which had "really been eyeing this field.” The consortium signed the final contract with the Ministry of Oil on the 25 January 2010. |

Change in ownership structure
As of December 2012 ExxonMobil was in the process of selling its stake in the field, apparently in response to pressure coming from Baghdad in the wake of the contracts the company signed with the Kurdistan Regional Government (KRG) in the north. According to Derek Browers of the Petroleum Economist, Russian Lukoil and Chinese CNPC, both of which have stakes in other fields in the south, were the front-runners in the competition to take over the asset. Deputy Prime Minister Hussein Shahristani said that he wanted the deal to be completed by the end of 2012.

Production and Export
In November 2010, an Iraqi oil official told Reuters that ExxonMobil and its partners had raised their production plateau at West Qurna 1 to 2.825 million bpd (from the original plateau target of 2.325 bpd on signing) after adding new reserves to the area covered by their original development contract. He noted that under a rehabilitation plan for the field, the consortium was planning to boost output from the field to around 750,000 bpd by 2013, from 2010 levels of 230,000-240,000 bpd. This would be achieved by drilling new wells, overhauling existing wells and implementing a series of water injection projects.

As of October 2012 output was at around 400,000 bpd. However industry analysts quoted by the Petroleum Economist argued that due to disappointing production levels and the low remuneration fee of $1.90 per barrel, West Qurna 1 turned into a loss-maker for ExxonMobil. The company's priority was to ramp up production quickly and cheaply, which did not happen. Furthermore, payments from the Iraqi government for oil produced were were delayed.

= References =