Russian oil giant Lukoil wins oil exploration rights to a large block in Iraq

Lukoil partnered with Inpex of Japan for the winning bid on a 5,500 square kilometer block on the very last day of the Iraqi auction. The block is in the south of Iraq.

Iraq had expected more bidders for the auction but the terms were not all that attractive to most oil companies. During the two day auction only 3 out of a total of 12 blocks were awarded.

Many oil companies thought that the risk in unexplored areas was high. As well Iraq is politically unstable.

Lukoil in tandem with Norway's Statoil and the Iraqi national oil company won a contract in 2009 to increase production in West Qurna 2 which has estimated reserves of 12.9 billion barrels. Lukoil now holds a 75 per cent interest as the Norwegian company sold its share to its Russian partner.

The deals that Iraq is offering foreign companies are technical service agreements. The oil companies are paid a fee of so much a barrel. In the West Qurna 2 after all expenses are paid Lukoil will receive only $1.50 per barrel. Any oil produced in the new bloc will fetch $5.99 a barrel. Given the price of oil even this is not all that much. For more see this article. Pakistan Petroleum also won a block and the first block to be award went to Kuwait Energy.

Russian oil company seek Iraq deal

Interesting that Conoco has a twenty percent interest in LUKoil. Perhaps that will give LUKoil some leverage. There is no news about when or if the new oil law will pass the Iraqi parliament.


LUKoil Looks for Political Backing in Iraqi Oil Deal
Reuters
LUKoil signed a partnership deal with the Foreign Ministry on Monday and said it counted on its support as it prepares for talks to revive a giant oil deal in Iraq.

LUKoil and the ministry said in a statement that the deal, the first of its kind in Russia, aims to support LUKoil's projects abroad, defend the firm's interests by diplomatic means and facilitate the firm's meetings outside Russia.

LUKoil will in turn consult the ministry on energy issues.

"Our company is entering new regions, including politically unstable regions. We will especially need support of the ministry in Iraq," Interfax quoted LUKoil CEO Vagit Alekperov as saying at a signing ceremony that was closed to reporters from foreign media organizations.

Alekperov said last month that his company was optimistic about the prospects of reviving a Saddam Hussein-era deal to develop Iraq's giant West Qurna deposit after the Iraqi Cabinet approved a draft oil law.

The $4 billion deal to develop West Qurna is expected to be complicated by the fact that it was scrapped by Hussein's government just before he was toppled in 2003.

Iraq's parliament still has to pass a hydrocarbons law, aimed at setting out the framework for foreign companies investing in Iraq after decades of sanctions under Hussein and years of violence since the U.S.-led invasion.

Alekperov said LUKoil would send a delegation to Iraq for more talks in March or April.

Alekperov is a major shareholder in LUKoil along with U.S. oil major ConocoPhillips, which has 20 percent in the firm.

Russia's Lukoil may lose deposit in Iraq

If this happens it certainly will not help Russia's relationship with Iraq but I imagine it is not that unexpected.

Lukoil may lose its oil deposit in Iraq 6.03.2007

A bill implying renegotiation of oil agreements completed during Saddam Hussein's presidency has been sent by the Iraqi government to the parliament of the country. The bill affects the interests of Russian company Lukoil exploiting Western Kurna – 2 oil field, reports Vremya Novestey. According to the newspaper, the bill implies 51 oil fields and 65 exploration blocks to be divided into four categories: 27 producing oil fields will make up the first category, the second category will be formed by oil fields with demonstrated reserves and the rest oil fields will form the third group. The fourth category will contain exploration blocks. The first two categories, including Western Kurna – 2, supposedly will pass under control of the new-created Iraqi national oil company. The bill may come into force in March.

Proven extracted reservoirs of the field are around 6 billion barrels of oil. The planned total installed cost in development of the field is around $4 billion. The LUKOIL share in the project has reached 68.5%, with the Iraq side having 25% and Zarubezhneft and Mashinimport with 3.25%, respectively.

sources:www.lenta.ru, www.lukoil-overseas.com
picture:bbc.co.uk