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Petroleum industry

Eni Consortium Accepts Iraqi Government Amendments to Zubair Oil Field Contract

Strategic Insights

— 1 min read

A consortium led by Italian energy giant Eni SpA (E) has accepted Iraqi government amendments to a service contract to develop the giant southern Zubair oil field. The deal, which is expected to be finalized in Baghdad on January 22, comes after Eni and its partners, Occidental Petroleum (OXY) and Korea Gas Corp. (036460.SE), won the right to develop the 4 billion barrel oil field last year following Iraq's first postwar licensing auction. The contract stipulates that Eni and its partners will be paid $2 for each extra barrel of oil they extract above current production, and will be liable for a 35% tax on profits. The development of the field is expected to require a significant investment of $10 billion in the first six years to raise output to 1.125 million barrels a day from 195,000 barrels a day at present.

Key Takeaways:

  • Eni SpA, a consortium leader, has accepted Iraqi government amendments to the service contract to develop the Zubair oil field.
  • The contract stipulates that Eni and its partners will be paid $2 for each extra barrel of oil extracted above current production.
  • A 35% tax on profits will be levied on the consortium.
  • The development of the field requires an investment of $10 billion in the first six years to increase output to 1.125 million barrels a day.
  • The consortium will pay the Iraqi oil ministry $300 million as a refundable five-year loan instead of paying a signature bonus.
  • Occidental Petroleum (OXY) and Korea Gas Corp. (036460.SE) are Eni's partners in the consortium.
  • The Zubair oil field has 4 billion barrels of oil reserves.

Statistics:

  • Investment required for the development of the field in the first six years: $10 billion
  • Current output from the Zubair oil field: 195,000 barrels a day
  • Projected output after development: 1.125 million barrels a day
  • Tax on profits for the consortium: 35%
  • Loan to the Iraqi oil ministry: $300 million
  • Oil reserve in the Zubair field: 4 billion barrels
  • Date of the expected finalization of the deal: January 22

Sources:

  • Euclid Infotech Pvt. Ltd
  • Syndigate.info
  • Albawaba.com

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