The future of BP’s flagship Rumaila oilfield in southern Iraq is in jeopardy after a bureaucratic snarl-up in Baghdad forced the company to axe a hundred crucial contractor jobs, is reported by the Financial Times.
The move highlights the mounting challenges facing western oil majors in Iraq, and bodes ill for the country’s ambitious plans to revive an oil industry still recovering from years of war and sanctions. Some oil majors are so disenchanted with the difficulties of doing business in Iraq that they are considering leaving the country for good.
Paolo Scaroni, chief executive of Italian oil group Eni, said earlier this month that he had told the Iraqi government: "Either you remove the obstacles or we will remove ourselves from the country.” Problems began for BP a few months ago after the Iraqi government stopped approving big-ticket contracts related to Rumaila, said people familiar with the matter, and also stopped issuing new visas for expats working there. BP told about a hundred expat contractors earlier this month that their contracts were being terminated with immediate effect. Eni has also been forced to lay off contractors at its Zubair field, which is near Rumaila.
The latest political uncertainty has coincided with an upsurge in violence: Iraqi government forces have been battling al-Qaeda affiliated militants in Fallujah and other cities in the western Anbar province, while dozens were killed in car bombings in Baghdad and Hilla on February 18. The worsening security situation comes as the international oil companies are already struggling to deal with Iraq’s notorious red tape and infrastructure bottlenecks that are hampering production. Experts say BP has fallen victim to a slowdown in decision-making across government ministries in Baghdad ahead of elections on April 30. "Everyone is preoccupied by the election,” said one senior western oil executive. "The big signatures are being delayed.”
Iraqi production dipped below 3m b/d in January, down from a peak of 3.24m b/d last April, because of ongoing maintenance work at southern ports in the Gulf. Meanwhile, exports fell as a result of militant attacks on a crucial oil pipeline and the festering dispute over control of oil resources between Baghdad and the semi-autonomous region of Kurdistan in the north. BP’s decision to axe contractors could cast a big shadow over Rumaila, one of the largest projects in the company’s portfolio. Under the deal BP signed with Baghdad in 2009, BP is obliged to raise output from the field to 2.85m barrels a day, from 1.4m b/d now.
