Iraq is turning to Chinese companies to replace ExxonMobil (XOM) in a $53 billion oil infrastructure megaproject, two sources told Energy Intelligence.
The escalation in regional tensions and deadlocked negotiations have made the U.S. supermajor’s involvement in the project look increasingly doubtful in recent months, the sources said, Kallanish Energy understands.
ExxonMobil has been discussing versions of what is now known as the South Iraq Integrated Project (SIIP) for several years. PetroChina was brought in as a partner in 2015, and the talks appeared to be heading for a successful conclusion, with oil minister Thamer Ghadhban saying in July a heads of agreement was imminent, Energy Intelligence reported.
But last week Ghadhban said negotiations had been held up by disagreement over the commercial terms of the project, and he blamed ExxonMobil.
The heightened risks for U.S. oil firms in southern Iraq — even greater since the recent attacks on Saudi oil installations — have further complicated matters.
PetroChina is now looking to bring fellow Chinese majors China National Offshore Oil Corp. (CNOOC) and Sinopec into the project, a Chinese source close to China National Petroleum Corp. (CNPC), the parent company of PetroChina, told Energy Intelligence.
If ExxonMobil walks away from the project it would be a blow to the oil minister. One industry source familiar with the project told Energy Intelligence he was skeptical Iraq would want it to be entirely Chinese-operated. Another Mideast source suggested approaching other companies was probably an attempt by the ministry to push ExxonMobil towards an agreement.
A 5-million-barrel-per-day (Mmbpd) water injection plan to maintain reservoir pressure at the major southern oilfields is a key component of the project, which would also involve extensive upgrading of transportation infrastructure, to raise export capacity to 6.5 Mmbpd.
The SIIP also includes raising the combined output from the Nahr Bin Umar and Ratawi oilfields from current levels of roughly 100,000 barrels per day, to 550,000 Bpdb/d, which will finance the project, as well as development of associated gas from those fields, Energy Intelligence reported.
