Page 5 - MEOG Week 27 2021
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MEOG                                         COMMENTARY                                               MEOG




























                         800,000 bpd by 2025.                 operatorship of the asset in 2009 following Iraq’s
                           However, Lukoil is believed to be dragging  first licensing round, and the original plateau
                         its heels on the Mishrif expansion and a final  target envisaged production of 2.85mn bpd with
                         investment decision (FID) is yet to be taken on  a maximum remuneration fee of $2 per barrel.
                         Yamama as the company pushes the MoO for an   The spun-off firm would be jointly owned
                         improvement to the maximum remuneration  between BP and PetroChina’s parent China
                         fee of $1.15 per barrel stipulated by the contract  National Petroleum Corp. (CNPC) and will hold
                         signed in January 2010.              the IOC’s stake in the field.
                           In addition to the unfavourable terms,   Speaking to the WSJ, the sources said that the
                         Lukoil’s difficulties in making money from  new company would hold its own debt, separate
                         WQ-2 also stem from Baghdad’s downward  from BP, and is expected to distribute profits via
                         negotiation of the original 1.8mn bpd produc-  dividends.
                         tion plateau target, first to 1.2mn bpd in 2013,
                         then to 800,000 bpd in 2018.         Exxon’s exit
                           Lukoil holds a 75% stake in the WQ-2 techni-  The Lukoil and BP news follows the departure
                         cal service contract (TSC), with the local North  of Royal Dutch Shell from Majnoon and West
                         Oil Co. holding a carried 25% interest. The Rus-  Qurna and comes as US super-major Exxon-
                         sian firm had been partnered by Norway’s Statoil  Mobil is in the process of extricating itself from
                         (now Equinor), which sold its 18.75% stake to  the West Qurna-1 oilfield project, the southern
                         Lukoil in May 2012. Market participants who  section of the broader West Qurna deposit. The
                         spoke with Middle East Oil & Gas (MEOG)  process has become fraught, as BOC is reported
                         estimate that Lukoil should be able to fetch a  to have denied Exxon’s attempts to sell its 32.7%
                         minimum of $1.4-1.5bn for the stake in West  stake in the field to two Chinese companies.
                         Qurna-2. They noted that the company’s deci-  In May, BOC informed ExxonMobil that it
                         sion was likely tied to OPEC+ restrictions on  had rejected the proposed transfer of its stake to
                         Iraqi oil output. Lukoil recouped its $6bn of cap-  China National Petroleum Corp. (CNPC) and
                         ital investments in West Qurna-2 in early 2017,  China National Offshore Oil Co. (CNOOC),
                         they said.                           noting that it did not “agree with the terms […]
                           It also holds a 60% stake in Iraq’s Block 10  agreed to with the two companies.”
                         and recently agreed terms with the MoO for   The state company added that it would not
                         the development of the block’s Eridu oilfield at  match the terms agreed with the Chinese firms.
                         an initial rate of 30,000 bpd by 2024. The maxi-  “If BOC wants to buy your contract share, this
                         mum remuneration rate for Block 10 is $5.99 per  should be considered under new terms and con-
                         boe, though these terms are also understood to  ditions,” it said.
                         be subject to ongoing amendment discussions.   It is not known whether either CNPC or
                         The field is anticipated to produce 250,000 bpd  CNOOC are interested in purchasing Lukoil’s
                         by 2027.                             stake in WQ-2, but BOC has already spoken of
                                                              its desire to replace Exxon with another Ameri-
                         BP                                   can company. Given the latest news, though, the
                         For its part, the Wall Street Journal last month  prospects of finding an IOC willing to assume
                         reported that BP was considering spinning off its  either of these roles are only growing slimmer.
                         Iraqi operations into a standalone entity, accord-  If Baghdad fails to ring the changes with
                         ing to sources spoken to last week by the WSJ.  its TSCs, it may be left with little option but to
                           The company holds a 38% in the ROO and  apportion further stakes in its upstream to more
                         is partnered by PetroChina (37%), Iraq’s state  Asian NOCs. However, with the country remain-
                         oil marketer SOMO (25%) and state-owned  ing nearly completely dependent on oil revenues,
                         Basra Oil Co. (BOC) on a long-term TSC  it can ill-afford to make significant concessions
                         which expires in 2034. The super-major took  on the state take from oil operations.™



       Week 27   07•July•2021                   www. NEWSBASE .com                                              P5
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