MOSCOW, September 01. /ITAR-TASS/. Gazprom Neft, the oil arm of Russian energy giant Gazprom, has started commercial oil production and supplies from the Badra field in southeastern Iraq, Gazprom Neft said on Monday.

“Gazprom Neft, the operator of the Badra oilfield in Iraq, announces that first oil from the field is now being delivered to Iraq’s main pipeline system for transfer to the export terminal in Basra (the Persian Gulf),” Gazprom Neft said in a statement.

Current deliveries from Badra to the pipeline amount to over 15,000 barrels of oil per day and this level will be maintained until the end of 2014.

Under the service contract signed with the Iraqi government, the consortium of investor companies will begin receiving a share of the oil produced at the field after a period of 90 days following the launch of commercial supplies.

All the oil produced in southern Iraq, including at Badra, is Basrah Light oil. The Iraqi State Oil Marketing Organization (SOMO) is responsible for oil sales and each quarter will be delivering a share of oil to the investor companies to compensate for their initial project costs, Gazprom Neft said.

“Once these project costs have been covered, the investor companies will receive remuneration in kind for ongoing development at the rate of $5.5 of oil per barrel produced. Each investor company will be selling their share of oil independently,” the statement said.

The first oil from the Badra field was produced in December 2013. The final commissioning at the oilfield and the testing of production and transportation infrastructure began in May 2014. Two wells are currently in production at the Badra field and a further three wells are being drilled under a contract with the Chinese company ZPEC. Under the service contract, production at the oilfield will reach 170,000 barrels of oil per day.

"Over the period of just a few years, a consortium of companies led by Gazprom Neft has fully prepared Badra, one of the most complex geological field structures in Iraq, for full-scale commercial development,” Gazprom Neft CEO Alexander Dyukov said.

“This is the first major international project in upstream the company has implemented from scratch. The unique experience gained during this project will contribute to our development of future projects both in Russia and internationally".

The Badra oilfield is located in the Wasit province in eastern Iraq. According to preliminary estimates, geologic reserves at the Badra field amount to 3 billion barrels of oil, Gazprom Neft said.

The Badra oilfield development project is scheduled to last 20 years with a possible 5-year extension.

The contract with the Iraqi government for the development of the Badra oilfield was signed in January 2010 after the completion of a bid process in December 2009. The winning bid was submitted by a consortium of companies consisting of Gazprom Neft, KOGAS (Korea), PETRONAS (Malaysia), and TPAO (Turkey). Gazprom Neft acts as the project operator.

Gazprom Neft’s share in the project is 30%, while KOGAS has 22.5%, PETRONAS has 15%, and TPAO has 7.5% The share of the Iraqi government represented in the project by the Iraqi Oil Exploration Company (OEC) is 25%