Drake & Scull International (DSI) said it won a Dh226 million engineering contract to help develop Iraq's supergiant Zubair oilfield in the south of the country.
The Dubai-listed company's deal follows last week's announcement that the Iraq government had agreed to clear the US$3.6 billion arrears owed to international oil companies by this September as a condition of a $5.3bn IMF financing relief package set earlier this month.
The debts had built up last year as a result of the oil price crash and the expense of dealing with the ISIL insurgency in the west of the country.
Eni of Italy was awarded lead on the technical services contract to develop Zubair – one of the world’s biggest oilfields, with estimated proven reserves of 4.5 billion barrels – in 2009, with an original goal to boost production to 1.2 million barrels per day from less than 200,000 bpd. But that target was downgraded three years ago to 850,000 bpd as Eni’s contract was extended five years to 2035. Field production recently was put at 360,000 bpd, or about 8 per cent of the country’s output.
DSI said the new contract was its second awarded by Eni on the Zubair development, with a pipeline installation contract awarded in 2012 having been completed last year. The company declined to comment on whether it was affected by the Iraq government’s budget woes.
The new contract is to oversee building a gas supply pipeline system to a power plant as well as water injection systems to boost the field’s output. Completion is scheduled for 2018.
Wael Allan, who was installed as DSI's chief operating officer in May, said DSI "has gained a noticeable foothold in the oil and gas infrastructure construction sector in the [Middle East and North Africa] region in [a] short period. The contract award has also raised DSI's total project wins to Dh570 million in very challenging circumstances."
DSI shares closed up 0.3 fils at 57.7 fils yesterday, having nearly doubled from a historic low in January, but are still substantially below their 2014 high of Dh1.90.
Eni has a 41.6 per cent share in the consortium developing the Zubair field, with its partners Occidental Petroleum, Korea Gas and Iraq’s state-owned Missan Oil making up the rest, although Occidental said last November that the Iraq government had agreed to buy its stake, a deal that has not yet been completed.
Underlining the difficulties Iraq has faced with its technical service contracts, which pay contractors in physical oil, Eni said its share of output from Zubair last year more than doubled to 41,000 bpd from the previous year. Its share rises both as it meets development targets and as oil prices decline, which exacerbates the pressure on the government when oil prices are falling.
Although Iraq’s oil output rose by 13 per cent last year, government oil revenue fell 18 per cent because of lower prices and fewer barrels to sell.
The budget constraints have led to sharp cutbacks by international oil companies among expatriate employees and in work programmes in Iraq in recent months.
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