Gazprom Neft has received its third consignment of oil from Iraqi governmental organisation SOMO (the State Organization for Marketing of Oil), representing compensation for costs incurred in developing the Badra oilfield. This consignment of Iraqi “Basrah Heavy” crude, amounting to one million barrels (about 140,000 tonnes) in total, was despatched in a very large crude carrier (VLCC) chartered by the purchaser from the Basra terminal in the Persian Gulf.
The purchaser of this oil is a major international oil company; the oil will be delivered FOB to South Korea.
A key condition of the fulfilment of the development contract — delivery of a minimum 15,000 barrels per day into the main trunk pipeline over the course of 90 days — was met at the end of November 2014, compliance with which allowed investors to start receiving compensation for costs incurred. The crude oil is transferred to consortium participants quarterly, with each company arranging its subsequent sale independently.
Commercial oil shipments from Badra commenced in August 2014 — all necessary infrastructure for crude production and transportation having been installed over three years prior to this. Six wells are currently in operation at Badra, with drilling being undertaken for a further three. Production at the field currently stands at 45,000 barrels per day.
* VLCC (very large crude carrier) — a class of tanker with a capacity of
** FOB — “free on board”, a trade term requiring the seller to deliver goods on board a vessel designated by the buyer.
The Badra oilfield is located in the Wasit Province, Eastern Iraq. Preliminary estimates indicate total oil in place at the Badra field to be in the order of three billion barrels. The contract for development of the field is expected to run for 20 years, with potential for extension by a further five. Following repayment of investors’ costs, the terms of the contract with the Government of Iraq envisage compensation in the order of $5.50 per barrel of oil: this contract having been signed with the Government of Iraq in January 2010, on behalf of a consortium comprising Gazprom Neft (operator), KOGAS (Korea), PETRONAS (Malaysia), and TPAO (Turkey). Gazprom Neft’s interest in the project is 30 percent, with KOGAS, PETRONAS and TPAO holding 22.5 percent, 15 percent, and 7.5 percent, respectively. The Iraqi government’s holding is represented by the Iraqi Oil Exploration Company (OEC), which holds 25 percent.
Field development is being undertaken by Gazprom Neft Badra, and marketing of Iraqi oil on the international market by Gazprom Neft Trading GmbH — both companies being subsidiaries of Gazprom Neft PJSC.
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