Majnoon Facing Large De-Mining Challenge

Source: Reuters 2/8/2012, Location: Middle East

Armoured bulldozers rumble over a small patch of Iraq's Majnoon oilfield, scraping up thousands of landmines, rockets and bombs that are hampering development of the site's massive reserves.

Flush against the border with Iran, Majnoon was effectively a battlefield during the 1980s when the two countries were at war. Now it is costing Royal Dutch Shell, the field's operator, millions of dollars and time to undo the damage.

Shell had a good sense of this world class field's potential in late 2009 when it was awarded a service contract to ramp it up to 1.8 million barrels per day by 2017. It did not, however, expect the massive ordnance clear-out that lay ahead.

"Majnoon was far more contaminated with mines and explosives than we envisaged," Ole Myklestad, Shell's manager at Majnoon, told Reuters. "It clearly took a lot more effort."

The 12.6 billion barrels Majnoon is one of the major fields alongside Rumaila, West Qurna Phase One and Zubair that the OPEC-member is developing with foreign companies in the south as it recovers from years of war and sanctions.

The series of foreign company contracts officially target production capacity of 12 million bpd by 2017, though half that amount looks more achievable given infrastructure constraints and logistical bottlenecks. Current Iraqi production is around 2.9 million bpd.

At Majnoon, local Iraqi companies are sweeping away the weapons - including a 500 kg bomb - so pipelines can be laid and wells can be drilled.

Around $30 million has been spent to scour more than eight million square metres and another $20 million will be spent this year. Under their service contracts with Baghdad, Iraq must repay firms for the considerable cost.

Shell hopes by the end of 2012, enough production facilities will be in place to boost flows to a 175,000 bpd threshold that triggers cost recovery and service fee payment. Save two de-gassing facilities, the southern field is virtually bare and output is only about 54,000 bpd.

"To reach an end of the year target will require huge cooperation across all the ministries, with the South Oil Company (SOC)," said Myklestad. "We can make it with the right cooperation in place."

Since taking over operations with Malaysian partner Petronas in March 2010, Shell has spent $1 billion on the field and is due to invest another $1 billion this year.




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