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BP and CNPC in cut-price Iraq oil deal
Wednesday, 1st July 2009

ENERGY
JOHN KENCHINGTON

AN ALLIANCE led by UK oil giant BP yesterday secured a six-year contract to develop Iraq’s biggest oil field, but had to agree to a fifty per cent cut in the fees it had been asking for.

In a consortium with China National Petroleum Corporation (CNPC), BP accepted a fee of $2 (£1.20) for each barrel it produces from the 17bn-barrel Rumaila oil field, compared to the $3.99 it initially proposed.

Iraqi authorities rejected an offer from an Exxon Mobil-led consortium, which had been seeking $4.80 for each barrel produced, paving the way for BP to bag the deal.

They also rejected an offer from China National Offshore Oil Corporation and Chinese group Sinopec, who wanted $25.40 per barrel extracted from the Maysan oil field. The government offered them just $2.30.

A key part of BP’s successful Rumaila bid was an ambitious promise to raise the field’s output to 2.85m barrels a day, from its current level of 1.1m, although the International Energy Agency on Monday said this was over-optimistic.

BP made no comment on the terms of the deal but said it and its partner were pleased to have participated in a “transparent and efficient process”.

The deal was the first between Iraq and a foreign oil giant since 1972, when the ruling Baath party nationalised the Iraq Petroleum Company. Seven years later Saddam Hussein took power.

Iraqi oil minister Hussein al-Shahristani said yesterday the six oil and two gas fields up for contract would add $1.7 trillion to government coffers over the next 20 years.

Barrels of Brent Crude oil are currently fetching prices around $73 on futures markets.

http://www.cityam.com/news-and-analysis/s8lhyq83hr.html

Well, if they are successful in raising production from 950,000 barrels per day to 2.85 million barrels per day, that means the oil company will make a profit of 1.9 million dollars per day at $1 per barrel, or 3.8 million dollars per day at $2 per barrel. That is PER DAY for the next how many years? 35% tax would still leave them with a sizable DAILY profit. And this is all after recovering their investment and who knows how much overhead will be included in their calculations of the cost of their investment.

$1 per barrel at first doesn't sound like much, but at a minimum it would work out to 1.235 million dollars per day (after the 35% tax), or 37.05 million dollars per month, or 444.6 million dollars per year.

To me that sounds like a lot of profit for just one field.

Iraq needs steady income to buyback large denoms................ after RV 1: $3,2 offcourse:clown: