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Oil major BP plc (BP - Analyst Report) has set a capital budget of $2.85 billion for the development of the giant Rumaila oilfield in Iraq in 2013. This marks a nearly 30% increase from $2.2 billion allotted for Rumaila in 2012.

BP plans to drill 300 new wells on the field over the next five years. Per the 2013 development plan for Rumaila, BP intends to issue three tenders for the drilling of 150 new oil wells in the second half of 2013. Each tender will cover spudding of 50 wells.

Development of the Rumaila field is being carried out under two levels. The existing program has boosted yield by about one-third to nearly 1.35 million barrels per day (MMbpd). This is expected to continue for the next three years and each year is likely to witness an incremental increase of 100,000 bpd.

Currently, the BP-led consortium is finalizing plans for the longer-term full field development, which will result in yield of 2–2.8 MMbpd.

The project partners for Rumaila – BP and China National Petroleum Corporation – had set the production goal of 2.85 MMbpd of oil in an agreement with the Iraqi government. However, this target is being reduced to 2 MMbpd, which is believed to be the yield after the commissioning of new development projects.

The Rumaila oilfield has been a major strength of Iraq’s oil industry for decades. Rumaila is estimated to hold reserves of about 17 billion barrels and currently produces the majority of Iraq's total output of over 3 MMbpd.

Augmenting output from Rumaila, the most prolific oilfield of the country, is crucial to the achievement of Iraq’s aim of increasing oil exports to 6 million barrels per day. Upgrade and expansion of its equipment and facilities have become essential to raise its output beyond 1.7 to 1.8 MMbpd.

In view of these, BP has called upon engineering companies to construct a 300,000 bpd production facility, for which over 20 firms are competing. A decision is anticipated in early 2014.

BP carries a Zacks Rank #3 (Hold). However, there are other stocks in the oil and gas industry like Dawson Geophysical Company (DWSN - Snapshot Report), Enerplus Corporation (ERF - Snapshot Report) and Exterran Holdings, Inc. (EXH - Snapshot Report) that appear more attractive in the short term. All three stocks carry a Zacks Rank #1 (Strong Buy).
 

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