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AAG Dailies

Lukoil, Statoil In Deal To Develop Iraqi Oil Field

December 30, 2009

Russia’s Lukoil and Norway’s Statoil on Tuesday signed a contract with Iraqi authorities to develop the vast West Qurna 2 oil field, the New York Times reported. Lukoil and Statoil had secured the winning bid on the field in Basra Province, in the south of the country, during a second licensing round held a few weeks ago. It is one of the world’s largest undeveloped oil fields. The deal still requires final approval from Iraqi authorities. Lukoil owns 85 percent of the venture while Statoil owns the remaining 15%, reports said. According to reports, the companies will develop the oil field to produce 1.8 million barrels per day (bpd) from its proven reserves of 12.88 billion barrels of oil. The pair will be paid a remuneration fee of $1.15 per barrel, according to the deal. Alex Munton, a Middle East analyst for Wood Mackenzie, a research and consulting firm based in Edinburgh, told the New York Times that the deal gives nearly all the revenues from the project to the Iraqi state. The benefits for Lukoil and Statoil center around deepening their ties to Iraqi oil production. “The returns will be fairly negligible,” Munton told The New York Times. “The companies have the opportunity to recover everything they spend and to get a wafer-thin profit on top, but this is really an opportunity to get in to Iraq.”  He added: “The potential costs of not seizing that opportunity are possibly greater than failing to make a decent return on this particular investment.”

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