BP taking oil from Iraq as payment

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ABU DHABI (Reuters) – BP has been lifting more crude oil cargoes in the past couple of months as payment for its work in southern Iraq, and is comfortable with that level of shipments, a senior executive of the oil company said on Monday.

Low oil prices and the fight against Islamic State have forced Baghdad to delay billions of dollars of cash payments which it owes to international oil companies (IOCs), so they have been allowed to take oil shipments instead.

Michael Townshend, BP’s president in the Middle East, ‎said current total production from Iraq’s giant Rumaila field was about 1.4 million barrels per day and was expected to remain steady in 2015.

“In terms of the position we have on Rumaila, the payments have picked up and I’m comfortable where they are,” he told reporters in Abu Dhabi.

“We get paid by liftings…either out of Ceyhan or out of the south…We certainly got more liftings in the last couple of months.” He did not give details of the liftings.

BP has also extended an agreement with Iraq’s Ministry of Oil to help arrest declining production at the huge northern Kirkuk oilfield, Townshend said. Kirkuk is currently disputed between the central government in Baghdad and Iraq’s Kurdish region.

“We had a letter of intent, which was for a year, and we extended that until the end of this year because there was a time last year where we couldn’t do anything productive.”

Under the deal, BP works on the Baghdad-administered side of the border with the Kurdish region, on the Baba and Avana geological formations. Kirkuk’s third formation, Khurmala, is controlled by the Kurdistan regional government.

BP, along with other IOCs, is in talks with Baghdad ‎over the technical service agreements under which they develop Iraq’s southern fields. Investments in the fields are made by the foreign firms, which are then supposed to receive per-barrel fees.

But low oil prices have made this arrangement difficult for the financially strapped Baghdad government. Iraq’s finance minister told Reuters in March that Baghdad was planning to change the way it operated exploration and production contracts with companies such as Royal Dutch Shell, BP and Exxon‎.

This may eventually move Iraq for the first time to production-sharing contracts, in which revenues are divided, from service contracts in which oil firms are paid a set fee.

Townshend said IOCs had presented the Ministry of Oil with some proposed amendments to their contracts.

“‎They’ve asked for our ideas – they’ve asked all the IOCs for ideas,” he said, declining to comment on whether the ministry had responded.

(Reporting by Rania El Gamal and Maha El Dahan; Editing by Andrew Torchia)

Read the original article on Reuters. Copyright 2015. Follow Reuters on Twitter.

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