Iraq's crude oil production from its southern oil fields has slipped by 100,000-150,000 barrels a day over the last six months as maintenance problems and a lack of investment undermine the country's output capacity, an oil industry source from Basra said Wednesday.
"Production from the south is declining," the source told Dow Jones Newswires by telephone from Basra.
Production from southern oil fields, which makes up 70% of the country's total output, has fallen to 1.7 million-1.75 million barrels a day since August 2008, compared to 1.85 million-1.9 million barrels a day throughout 2007 and the first seven months of 2008, the source said.
"Production decline is caused by lack of reserve maintenance and investment," he said.
The U.S. watchdog on reconstruction in Iraq confirmed in its recent report to Congress that Iraq's crude oil production from the south was declining. "Oil field management problems caused a noticeable decrease in crude oil production in the south," said the report issued Jan. 30 by the U.S. Special Inspector General for Iraq reconstruction.
As for the northern and southern oil fields, the report said: "Crude oil production averaged 2.37 million barrels a day this quarter (last quarter of 2008) - a 4% decrease from the previous quarter," the report stated.
The Iraqi oil source, however, said the South Oil Company, or SOC, which operates southern Iraqi oil fields, is planning to raise output by up to 400,000 barrels a day in two to three years time.
The plan drafted by the SOC and the oil ministry in Baghdad, includes drilling or rehabilitating some 200 oil wells in different southern oil fields, he added.
He said new contracts were recently signed with foreign companies to drill or repair oil wells in the south. He didn't name the companies but sources close to the SOC said that Iraq signed contracts worth millions of dollars late December with U.S. firm Weatherford International Ltd. (WFT), a Syrian company and a firm from the United Arab Emirates to drill around 50 wells as part of the plan.
The country has recently embarked on its first and second oil licensing rounds and hopes to have part of the contracts signed by June 2009, and rest by the end of the year.
But even if deals are signed and approved by the Iraqi parliament in that ambitious time frame, major work by foreign companies won't begin until the beginning of next year at the earliest, analysts said. Iraq has the world's largest proven oil reserves, but years of violence and endless political wrangling since the end of U.S.-led war in Iraq in 2003 have repeatedly delayed getting those reserves out of the ground.