Iraq Plans to Ramp Up Oil Production as Foster Wheeler Wins Basic Engineering Contract for Oil Export Terminal

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Researched by Industrial Info Resources (Sugar Land, Texas)--Foster Wheeler Energy Limited (Reading, United Kingdom), a subsidiary of Foster Wheeler AG (NASDAQ:FWLT) (Clinton, New Jersey), was recently awarded a basic engineering contract by the South Oil Company (SOC) (Basra, Iraq). Under the contract, Foster Wheeler will take care of the basic engineering required to set up new offshore oil export facilities that will add to the existing Al-Basra terminal in Iraq. The value of the contract is expected be announced in the company's first-quarter bookings of 2009.

The oil export facilities will include new tanker-loading buoys with single point mooring, in addition to metering, pipelines and oil pumping. The export facility will have a capacity of 4.5 million barrels per day (BBL/d) of oil.

Foster Wheeler's involvement in the project will include the preparation of a technical definition package, schedules and plans for the implementation of the whole project, and documents for inviting bids for the construction and supply of the offshore export facilities.

Michael J. Beaumont, Chairman and CEO of Foster Wheeler Energy, said that the company had been in talks with Iraq's Ministry of Oil and SOC about upgrading the oil export facilities for some time and that he appreciated that SOC had selected his company to undertake the basic design of the project.

Iraq has at least 115 billion barrels of proven oil reserves, the third largest in the world. Iraq recently invited bids for the development of 19 of its oil and gas fields. Two major bidding rounds have been initiated, and a third is being planned where 65 exploration blocks will be offered for development. After the first round of bidding, the contracts are scheduled to be signed in mid-2009. Second-round contracts are expected to be signed by year's end.

Iraq currently has a production capacity of 2.4 million BBL/d of oil and intends to ramp that up by 4 million BBL/d-4.5 million BBL/d over the next four to six years. The country aims to produce 6 million BBL/d by 2013. Before the invasion, Iraq's production had reached 3.5 million BBL/d, which is rather low compared with Saudi Arabia's claimed potential of 12.5 million BBL/d.

According to a recent Oil & Gas Journal report, out of Iraq's proven reserves in 80 fields, only 15 have been developed partially. Seven of the largest fields contain about two-thirds of the total reserves. The country's potential reserves are estimated at about 215 billion barrels, perhaps the largest in the world. The article also predicts that Iraq would require 15 to 20 years to reach a stable output of 10 million BBL/d. Iraqi officials are confident that the nation's oil sector will flourish. One of the biggest advantages of Iraq's oil sector is that the costs of crude oil extraction are very low -- about $2 to extract a barrel of oil. This gives Iraq a huge advantage over firms and nations that extract oil from deep-sea wells and other difficult locations.

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