Page 8 - FSUOGM Week 27 2021

FSUOGM COMMENTARY FSUOGM

The West Qurna-2 field.
Source: Lukoil.

Lukoil’s difficulties in making money from between BP and PetroChina’s parent China
WQ-2 also stem from Baghdad’s downward National Petroleum Corp. (CNPC) and will hold
negotiation of the original 1.8mn bpd produc- the IOC’s stake in the field.
tion plateau target, first to 1.2mn bpd in 2013, Speaking to the WSJ, the sources said that the
then to 800,000 bpd in 2018. new company would hold its own debt, separate
Lukoil holds a 75% stake in the WQ-2 techni- from BP, and is expected to distribute profits via
cal service contract (TSC), with the local North dividends.
Oil Co. holding a carried 25% interest. The Rus-
sian firm had been partnered by Norway’s Statoil Exxon’s exit
(now Equinor), which sold its 18.75% stake to The Lukoil and BP news follows the departure
Lukoil in May 2012. Market participants who of Royal Dutch Shell from Majnoon and West
spoke with Middle East Oil & Gas (MEOG) Qurna and comes as US super-major Exxon-
estimate that Lukoil should be able to fetch a Mobil is in the process of extricating itself from
minimum of $1.4-1.5bn for the stake in West the West Qurna-1 oilfield project, the southern
Qurna-2. They noted that the company’s deci- section of the broader West Qurna deposit. The
sion was likely tied to OPEC+ restrictions on process has become fraught, as BOC is reported
Iraqi oil output. Lukoil recouped its $6bn of cap- to have denied Exxon’s attempts to sell its 32.7%
ital investments in West Qurna-2 in early 2017, stake in the field to two Chinese companies.
they said. In May, BOC informed ExxonMobil that it
It also holds a 60% stake in Iraq’s Block 10 had rejected the proposed transfer of its stake to
and recently agreed terms with the MoO for China National Petroleum Corp. (CNPC) and
the development of the block’s Eridu oilfield at China National Offshore Oil Co. (CNOOC),
an initial rate of 30,000 bpd by 2024. The maxi- noting that it did not “agree with the terms […]
mum remuneration rate for Block 10 is $5.99 per agreed to with the two companies.”
boe, though these terms are also understood to The state company added that it would not
be subject to ongoing amendment discussions. match the terms agreed with the Chinese firms.
The field is anticipated to produce 250,000 bpd “If BOC wants to buy your contract share, this
by 2027. should be considered under new terms and con-
ditions,” it said.
BP It is not known whether either CNPC or
For its part, the Wall Street Journal last month CNOOC are interested in purchasing Lukoil’s
reported that BP was considering spinning off its stake in WQ-2, but BOC has already spoken of
Iraqi operations into a standalone entity, accord- its desire to replace Exxon with another Ameri-
ing to sources spoken to last week by the WSJ. can company. Given the latest news, though, the
The company holds a 38% in the ROO and prospects of finding an IOC willing to assume
is partnered by PetroChina (37%), Iraq’s state either of these roles are only growing slimmer.
oil marketer SOMO (25%) and state-owned If Baghdad fails to ring the changes with
Basra Oil Co. (BOC) on a long-term TSC which its TSCs, it may be left with little option but
expires in 2034. The super-major took opera- to apportion further stakes in its upstream to
torship of the asset in 2009 following Iraq’s first more Asian NOCs. However, with the country
licensing round, and the original plateau target remaining nearly completely dependent on oil
envisaged production of 2.85mn bpd with a revenues, it can ill-afford to make significant
maximum remuneration fee of $2 per barrel. concessions on the state take from oil opera-
The spun-off firm would be jointly owned tions. ™

P8 www. NEWSBASE .com Week 27 07•July•2021