Exxon Considers Return to Iraq to Explore its Largest Majnoon Oil Field, Sources Say

Last month, Iraq’s state news agency INA reported that SOMO was in advanced discussions with Exxon about the potential deal to secure storage capacity in Singapore using tanks owned by the US oil company.

Oil company ExxonMobil is considering returning to Iraq after nearly two years of being away. The company is looking to sign agreements to lay the groundwork for exploring the country’s massive Majnoon oil field, according to people familiar with the matter.

The oil field is located 60 km (37 miles) southwest of Basra in the southern part of the country. It is one of the largest oil fields in the world with an estimated 38 billion barrels of oil.

Exxon is reportedly preparing to sign a preliminary deal with Basra Oil Company and the state’s oil company SOMO in the near future.

An ExxonMobil spokesperson stated that the company is in talks with the Iraqi oil minister as it looks for opportunities to optimize its portfolio. Basra Oil, SOMO, and its Embassy in Washington, D.C. did not immediately respond to requests for comment.

The potential agreement is also expected to discuss the export infrastructure and new oil marketing projects in southern Iraq, according to reports.

Last month, Iraqi state news agency INA reported that SOMO was in advanced discussions with Exxon about the potential deal to secure storage capacity in Singapore using tanks owned by the US oil company.

Over the past two years, Iraq has signed deals with several oil companies that had previously left the country, including Chevron, France’s TotalEnergies, and the UK’s BP.

According to the International Energy Agency (IEA), Iraq is expected to become the world’s third-largest source of oil supplies over the next 10 years, with an increase in production of nearly 30%.

The Paris-based organisation, which provides energy policy advice, noted that Iraq has enormous potential, but it will face significant challenges in increasing production. There will be many logistical and regulatory challenges that will increase the cost and complexity of developing oil and gas projects.

Many international oil companies, including BP, ExxonMobil, and Royal Dutch Shell, had signed deals earlier in the decade to get their hands on Iraq’s vast resources, but the outcome was mixed. Shell decided to withdraw from the giant Majnoon oil field in 2017 because it was not satisfied with the contract terms.

According to the International Energy Agency, Iraq is expected to increase its oil production to nearly 6 million barrels per day by 2030, overtaking Canada to become the world’s fourth-largest oil producer as it continues to work to rebuild its oil industry after decades of conflict and sanctions. During this period, only the United States and Brazil are expected to increase their output.

However, the growth rate of Iraq is slower than it was earlier this decade, as the country faces competition from foreign investment and skilled expertise, and continues to struggle to inject water to maintain oil reservoir pressure. The IEA also notes that the projection was lower than the agency’s last prediction from seven years ago, when it expected Iraq to produce 7.5 million barrels a day by 2030.

Investment in Iraq’s oil and gas industry has dropped from a peak of just over $20 billion in 2014 to around $12 billion a year now, according to an IEA report. However, the reduction in project costs has helped mitigate the impact caused by cutbacks in output.

Water is very important for the production in the oil industry, since relatively low recovery rates mean Iraqi oil fields depend on liquid injection to maintain the oil demand pressure. The IEA estimated that water demand in the oil industry will increase by 60%, reaching more than 8 million cubic meters per day by 2030.