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UPDATE 2-Russia's Gazprom Neft sees Iraqi output start in spring

Wed, 05th Feb 2014 14:34

* Gazprom Neft, Shell get 3 licences for West Siberia

* To sell oil from 1st Arctic offshore field at a discount

* Gazprom Neft to get commercial oil in Iraq in 2014

By Katya Golubkova and Olesya Astakhova

MOSCOW, Feb 5 (Reuters) - Russia's Gazprom Neft plans to start commercial oil production in spring at its Badraoilfield in Iraq and hopes for an average output of 15,000barrels per day (bpd) this year, a company official said onWednesday.

Gazprom Neft, the oil arm of top Russian gas producerGazprom, is targeting hydrocarbon production of 100million tonnes of oil equivalent (2 million bpd) by 2020, up 60percent from 62.2 million tonnes last year.

It earlier postponed initial production at Badra due tosafety concerns and logistical problems.

"We plan to start production (at Badra) in spring ... thetarget of this year is to reach output of 15,000 barrels perday," Vadim Yakovlev, a first deputy chief executive of GazpromNeft, told reporters.

Its output at Badra has been estimated to reach 170,000 bpdof crude oil by 2017.

Recent violence in Iraq, in part a spillover fromneighbouring Syria, has increased concerns about security, evenwhile the government is hoping that this year will bring thebiggest annual rise in oil exports in a decade.

The oil field is located in the Wassit Province in easternIraq with an estimated 3 billion barrels of oil in place. TheRussian company submitted a tender in December 2009 and signed acontract with the government in January 2010 to develop thefield.

Since then, Gazprom Neft has had bumpy relations with thecentral Iraqi government over its plans to develop oil in thesemi-autonomous Kurdistan region, where it has shares in theGarmian, Shakal and Halabja blocks.

Yakovlev said the company plans to announce a commercialdiscovery at Garmian and start test production at the block thisyear but declined to elaborate.

Kurdistan alone may produce up to 10 million tonnes of oilequivalent (200,000 barrels per day) at Gazprom Neft's projectsby 2020, he said.

SHALE WITH SHELL

In Russia, a joint venture between Gazprom Neft and RoyalDutch Shell has secured licenses this year to startexploration at three hard-to-recover fields in the Bazhenovformation in the West Siberian region of Khanty Mansiisk,Yakovlev said.

Oil production from tight rock formations is needed to helpkeep Russia's output annual at over 10 million bpd, the world'slargest.

Gazprom Neft and Shell have already started "fracking" foroil in Siberia as part of another joint venture.

Moscow has introduced tax breaks to encourage thedevelopment of Bazhenov and other shale deposits, which have ledto drilling ventures with international majors such asExxonMobil and Statoil.

Russian producers have so far reported recoverable crude oilreserves of 500 million tonnes, or 3.5 billion barrels, inBazhenov.

Yakovlev also said the company would probably sell oil fromPrirazlomnoye, Russia's first Arctic offshore oil deposit, at adiscount to Urals and Brent benchmark blends due to its highersulphur content and higher viscosity.

Prirazlomnoye, which has faced stiff resistance from greenactivists, is expected to produce 6,000 bpd this year andplateau at 120,000 bpd in 2021.

Gazprom Neft also banks on other Arctic fields tocontribution to production.

Its Novoportovskoye onshore Arctic field is scheduled forcommercial production at the end of 2015 or beginning of 2016and reach with peak production of 5.5 million tonnes (110,000bpd) in 2018, Yakovlev said.

He added that the peak production estimate might be revisedupwards by the end of this year after additional exploration.

Novoportovskoye, previously expected to produce 120,000 to180,000 bpd by 2020, has better oil characteristics bycomparison with Prirazlomnoye and may become a new grade to feedrefineries in northwest Europe. It is expected to trade at apremium to Brent.

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