Russia’s Lukoil allowed to retain Iraqi oilfield for one year

Iraq has decided to allow Russia’s Lukoil to retain its 75 percent stake in one of the world’s largest oilfields for one year.

During that period, the oil company can either resume management of the West Qurna-2 field near the southern port of Basra or sell its share to another oil company.

Iraq’s embassy in Moscow has issued what it described as a clarification of media reports that Iraq had decided to nationalise the oilfield following Lukoil’s decision to quit under mounting US sanctions.

West Qurna-2 is wholly owned by Iraq, the embassy said in a statement carried by the Iraqi state news agency, adding that Lukoil was responsible for the management, development and extraction of oil from the field in exchange for fees under a service contract awarded in 2008.

“Consideration was given to retain Lukoil for one year, during which it has the right to transfer its rights and concessions under the service contract to any company qualified according to the Iraqi oil ministry’s criteria or to resume its operations as the operator of the field if the sanctions are lifted,” the statement said.

Iraq said last week it had decided to hand over the field to the state-owned Basra Oil Company, which controls 25 percent of the operations.

“The cabinet endorsed a decision to allow Basra Oil Company to manage oil operations at West Qurna-2 field in line with the provisions of the field’s service contract,” the prime minister’s information office said in a statement.

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The move came nearly a month after Baghdad invited US oil majors to manage the giant field, which pumps nearly 10 percent of the Opec member’s output and has estimated proven crude deposits of 14 billion barrels.

Direct negotiations were underway with the invited companies, which will be allowed to submit offers and compete openly, the oil ministry said.

Transferring the field’s management to a US operator will support Iraq’s production stability, protect its market share and ensure the continuity of state revenues, it added.