Iraq faces problems cutting 1 million bpd of crude output: sources


BASRA, Iraq/BAGHDAD – Iraq will struggle to cut crude output a record 1 million barrels per day (bpd) or 23 % from May under OPEC’s deal with Russia and other producers, and Baghdad has yet to agree with oil majors about where the cuts will come from, industry sources said.

Majors such as BP, Exxon Mobil, Lukoil and Eni produce the lion’s share of Iraq’s output and have so far resisted calls for cuts, prompting Iraqi officials to review options such as asking the companies to bring forward field maintenance.

Less than full compliance by Iraq could hurt the OPEC+ group’s efforts to curtail supply by as much as 9.7 million bpd to support oil prices that have crashed along with fuel demand during the coronavirus outbreak.

“Talks with foreign companies are still continuing and we seek to reach a deal to cut production without entailing financial burdens on Iraq,” said a senior Basra Oil Co. (BOC) official who is part of the negotiations.


Talks are focused on how much crude each company should cut and the timetable, said the senior official.

BP, Exxon Mobil, Lukoil and Eni declined to comment.

“We will set a timetable that will enable companies to carry out scheduled oilfields maintenance during the production cut timings,” said the official.

Iraq has received positive responses from at least two majors operating in Basra on the cut deals and the proposal to carry out scheduled oilfield maintenance during the curtailment, said two BOC officials without elaborating.


Officials said the oil ministry has instructed to Basra Oil Co. to cut at least 700,000 barrels from its oilfields, including fields operated by Iraq national oil companies. It was still unclear how this cut portion will be distributed among foreign companies.

Officials said the rest of the planned cut could come from oilfields in other southern provinces in Misan and Nassiriya.

International companies operate in Iraq’s southern oilfields under service contracts that pay them a fixed dollar fee for volumes produced. Baghdad also reimburses companies for the cost of building projects and approval of oilfield development plans.

“One of the options on the table is to ask international companies to cut production by rotation to make sure all contractors must contribute to cuts,” said a senior BOC manager who oversees foreign firms’ operations in the south.


“Majority of Iraq’s production come from the foreign companies’ fields and we need their cooperation to help comply with OPEC cut deal,” he said.

The Organization of the Petroleum Exporting Countries (OPEC), Russia and other large oil producers in OPEC+ agreed this month to cut their combined production by 9.7 million bpd in May and June to support the oil market. Iraq’s is to cut 1.061 million barrels per day.

Officials said the bulk of the targeted cut will be from the southern Basra oilfields developed by foreign firms, including Rumaila, operated by BP and produces around 1.45 million bpd, West Qurna 1, operated by Exxon Mobile and produces over 450,000 bpd.


Other fields targeted for cuts include West Qurna 2, run by Russia’s Lukoil and produces around 400,000 bpd and Zubair which produces 250,000 bpd and managed by Italy’s Eni.

Basra oil officials said it would be hard to achieve further production cuts from the small fields, operated by BOC teams, that were targeted last year by an output cut under a previous OPEC+ deal.

Output from Nahr Bin Omar stands at 20,000 bpd and combined production from Tuba, Luhais and Artawi reaches to 15,000 bpd.

“We can’t cut further oil anymore from these small fields,” said the BOC manager who supervises operations at the state-run developed field.


Oil officials said they do not expect any cut in around 320,000 bpd of crude produced from Kirkuk northern fields, because most of their output is used to feed small northern refineries.

“We’re still exchanging corresponeses with foreign contractors and we need more time to settle the production cut issues,” said a BOC official.

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