Page 5 - MEOG Week 31 2021

MEOG COMMENTARY MEOG

WQ-2 has a current production capacity of The Russian company also holds a 60% stake
around 400,000 bpd from the Mishrif formation, in Iraq’s Block 10 and recently agreed terms with
though Lukoil reported recently that Q1 produc- the MoO for the development of the block’s
tion had averaged just 307,500 bpd on account of Eridu oilfield at an initial rate of 30,000 bpd
compliance with OPEC+ output cuts. by 2024. The maximum remuneration rate for
The company has plans to raise this by a fur- Block 10 is $5.99 per boe, though these terms are
ther 350,000 bpd through its Phase 3 Yamama also understood to be subject to ongoing amend-
expansion and another 50,000 bpd to be added ment discussions. The field is anticipated to pro-
from the Mishrif, taking total output capacity to duce 250,000 bpd by 2027.
800,000 bpd by 2025.
However, Lukoil is believed to be dragging Qurna-1
its heels on the Mishrif expansion and a final Meanwhile, Abdul Jabbar said that the MoO
investment decision (FID) is yet to be taken on is working to find a resolution to the situation
Yamama as the company pushes the MoO for an relating to ExxonMobil, the current operator
improvement to the maximum remuneration of the southern portion of the deposit – West
fee of $1.15 per barrel stipulated by the contract Qurna-1.
signed in January 2010. Last week, the American super-major filed an
In addition to the unfavourable terms, arbitration case at the International Chamber of
Lukoil’s difficulties in making money from Commerce (ICC) against state-owned Basra Oil
WQ-2 also stem from Baghdad’s downward Co. (BOC), citing the stifling of efforts to sell its
negotiation of the original 1.8mn bpd produc- 32.7% stake in the field to PetroChina and China
tion plateau target, first to 1.2mn bpd in 2013, National Offshore Oil Co. (CNOOC).
then to 800,000 bpd in 2018. A company spokeswoman was quoted last
The Russian firm had been partnered in week as saying: “We have worked in good faith
WQ-2 by Norway’s Statoil (now Equinor), which and in accordance with the contract with the
sold its 18.75% stake to Lukoil in May 2012. Mar- Basra Oil Co. and the government of Iraq to
ket participants who spoke with Middle East Oil secure their support for the transaction.”
& Gas (MEOG) estimate that Lukoil should be However, Abdul Jabbar suggested that a res-
able to fetch a minimum of $1.4-1.5bn for the olution to the issue is in sight. “We respect the
stake in West Qurna-2. contracts regarding the timing, but we were late
They noted that the company’s decision was in completing the share purchase programme
also likely tied to a combination of OPEC+ and that is currently being addressed,” he said,
restrictions on Iraqi oil output. Lukoil recouped adding that the ministry is working to “official
its $6bn of capital investments in West Qurna-2 approvals” to purchase Exxon’s shares in the field
in early 2017, they said. on behalf of BOC.™

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