Big Oil's Chalking Up Successes in Iraq

When we in the U.S. think of BP (NYSE: BP  ) , we tend to conjure up images of the company's horrible and expensive part in what happened in the Gulf of Mexico in April. But there's more to the company than that admittedly tragic incident.

Take BP's major success in the southern part of Iraq, for instance. Along with a subsidiary of PetroChina (NYSE: PTR  ) and an oilfield services contingent that includes Schlumberger (NYSE: SLB  ) and Weatherford (NYSE: WFT  ) , the company is on course to boost production at the country's giant Rumaila field by 100,000 barrels per day this month, bringing the field's output to 1.1 million barrels. That 10% increase wasn't supposed to occur for another three years.

"Not only are we increasing production, but we are also building a great new team, introducing better reporting of safety and environmental incidents, and taking actions to begin to improve safety in particular," said Salah Mohammed, the Rumaila effort's general manager. All of this has occurred just since last year, when the consortium was awarded a contract to work on the field, which sits near the city of Basra.

That's not the only Big Oil success story emerging from Iraq these days. Last month, Royal Dutch Shell (NYSE: RDS-A  ) said that, through its efforts, daily production at the Majnoon field, also near Basra, has improved to 70,000 barrels, versus 45,000 barrels when it began working there.

Beyond that, other majors such as ExxonMobil (NYSE: XOM  ) and Italy's Eni (NYSE: E  ) are working in the area. Their efforts are already benefiting Basra, Iraq's de facto oil capital. The dusty, primarily Shiite town near the Persian Gulf is in the early stages of increased building activity.

As The Wall Street Journal noted on Thursday, the overall objective in Iraq is to increase total production from its 2.5 million barrels per day today to 12 million barrels daily before 2020. Hitting that target would be an unprecedented accomplishment. However, based in part on the energy industry's quick successes, Iraq's estimated crude reserves were increased to 143.1 billion barrels last month, versus the prior 115 billion barrels.

Much of the industry's continued progress in expanding Iraq's output will depend on the country's ability to establish a stable government. Progress may have been made on Thursday when, after an eight-month standoff, Prime Minister Nouri al-Maliki received the go-ahead from Iraq's president to form the next government. But al-Maliki is a Shiite, and when Sunni members walked out of parliament, it clearly wasn't a good sign. Nor was a car bomb explosion in Basra that killed 12 and wounded 30 earlier this week.

For now, we can only hope that the war-ravaged country's politics and security continue to improve. At the same time, it's a good sign that BP, which obviously has had its own travails, is getting it done in Iraq. It's a story that energy-investing Fools should watch closely.

The Fool owns shares of ExxonMobil. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Fool contributor David Lee Smith doesn't own shares in any of the companies named in this article. The Motley Fool has a disclosure policy.


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