Page 12 - FSUOGM Week 27 2021

FSUOGM INVESTMENT FSUOGM

Lukoil plans exit from West Qurna-2

IRAQ RUSSIAN independent oil producer Lukoil has Market participants who spoke with News-
notified the Iraqi authorities of its intention to Base estimate that Lukoil should be able to fetch
Lukoil is meanwhile divest its stake in the giant West Qurna-2 oil pro- a minimum of $1.4-1.5bn for the stake in West
expanding in Mexico. ject in southern Iraq to Chinese companies, Iraqi Qurna-2. They noted that the company’s deci-
Oil Minister Ihsan Abdel Jabbar said in a video sion was likely tied to OPEC+ restrictions on
posted on social media on July 3. Iraqi oil output. Lukoil recouped its $6bn of cap-
Lukoil has a 75% stake in the project, which ital investments in West Qurna-2 in early 2017,
currently flows around 400,000 barrel per day they said.
from the Mishrif formation. The company has
plans to double this to 800,000 bpd by 2025, Mexican expansion
through further development at Mishrif and by West Qurna-2 represents one of Lukoil’s largest
targeting the deeper Yamama formation. How- international investments. The company has
ever, NewsBase reported in May that Lukoil was sought to expand its overseas upstream business
dragging its heels on the expansion. in recent years in order to offset decline at its
Delays have been linked to Lukoil pushing older fields in Western Siberia.
for an increase in the maximum remuneration While scaling back in Iraq, Lukoil also
fee of $1.15 per barrel for West Qurna-2’s crude, announced on July 5 it had agreed to acquire
as stipulated in a 2010 contract. The fee was the a 50% operating position at Area 4 off the
lowest rate agreed by any international oil com- coast of Mexico, in a deal worth $435mn.
pany (IOC) during Iraq’s first four bid rounds It will replace Houston-based Fieldwood
between 2009 and 2012. Wood Mackenzie esti- Energy, which entered Chapter 11 bankruptcy
mates Lukoil’s profits at the field at only $0.56 per in August last year and is still undergoing
barrel. reorganisation.
Lukoil is not the only company seeking Area 4 is 58 square km in size, covering
divestments in the Middle Eastern country. BP waters 30-45 metres deep in the oil-rich Gulf of
is mulling a withdrawal from the giant Rumaila Mexico. It hosts the 2005 Ichalkil and Pokoch
oilfield in the country, Abdul Jabbar said. BP shallow-water oil finds, understood to contain
has a 47.6% stake in the field, which flows at a 564mn barrels of oil equivalent (boe) in recover-
rate of 1.5mn bpd and is estimated to hold 17bn able reserves, of which 80% is crude oil, accord-
remaining barrels of recoverable oil. ing to Lukoil.
The minister explained that both companies First oil from the block is scheduled in the
were unhappy with Iraq’s investment climate. third quarter of this year, and the project is
“The current investment environment in expected to consist of three stages that will even-
Iraq is inappropriate to keep major investors,” he tually produce 115,000 barrels of oil equivalent
said. “All major investors are either looking for per day (boepd). In updated development plans
another market or for another partner. We, as an submitted to Mexican regulators last month,
investment environment, are inappropriate for Fieldwood said the block would require $7bn in
major partners. investments over its lifetime, with the first phase
Foreign investors in Iraq’s upstream have comprising two wells tied to a platform.
long been irked by the government’s penchant The deal, which is subject to certain condi-
for altering contract terms, undermining their tions, including approval by Mexican authorities,
already low-margin investment returns. News will complement Lukoil’s existing activities in
that BP and Lukoil are seeking an exit comes Mexico, which comprise the offshore Block 12
after Iraq formally asked to buy ExxonMobil’s and the onshore Amatitlan block, the Russian
32.7% stake in West Qurna-1 in May, after the company said. It did not say when the transac-
US major expressed its desire to divest. Abdul tion would be closed.
Jabbar described the deal’s $350mn price tag as Fieldwood itself has not commented on the
“very low.” sale. ™

P12 www. NEWSBASE .com Week 27 07•July•2021