Gazprom Neft Cost Estimate for Iraq Field Raised to $3 Billion

OAO Gazprom Neft, the oil arm of Russia’s natural gas exporter, increased its estimated costs for the Badra oil field in Iraq to about $3 billion, according to a bond prospectus this month from its parent company.

The St. Petersburg, Russia-based oil producer had forecast costs for the Badra development at about $2 billion, according to a Nov. 10, 2010 press release on its website and a prospectus for OAO Gazprom issued in July last year.

Iraq’s central government awarded an investor group led by Gazprom Neft and including Korea Gas Corp., Petroliam Nasional Bhd. and Turkiye Petrolleri AO the operating contract to develop the Badra oil field in 2009. Gazprom Neft is seeking to boost oil and gas output to 100 million metric tons a year by 2020, a more than 60 percent increase from last year, with developments in Siberia, the Arctic offshore, Venezuela and Iraq.

The Gazprom Neft-led group is planning to begin oil output at Badra this year and produce 170,000 barrels a day from the field by 2017. The Iraqi government is allowing the group to recoup initial investments, awarding a fee of $5.50 a barrel produced over the 20-year span of the contract.

Gazprom Neft is also investing in projects in Iraq’s Kurdistan region where it plans to start production this year.

Gazprom Neft’s press office declined to comment on the company’s estimated costs for Badra when called today by Bloomberg.

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