OAO Lukoil (LKOH) agreed to scale back its production target for crude from Iraq’s West Qurna-2 field as the government sought to persuade Exxon Mobil Corp. (XOM:US), Royal Dutch Shell Plc (RDSA) and Eni SpA (ENI) to make similar cuts at other deposits.
Lukoil, Russia’s second-largest crude producer, accepted an output goal of 1.2 million barrels a day at the field it operates in southern Iraq, down from the 1.8 million barrels a day it initially sought to produce, Abdul Mahdy Al-Ameedi, director general of the Oil Ministry’s licensing department, said today in a telephone interview in Baghdad.
The ministry is in discussions with Exxon, Shell and Eni about reducing targets at the West Qurna-1, Majnoon and Zubair fields where each holds respective rights, Al-Ameedi said. “We are in talks to decrease output, but until now we didn’t reach an agreement on final numbers,” he said.
Iraq has sought foreign investment to help rebuild its energy industry after the U.S.-led invasion of 2003 ousted the regime of Saddam Hussein. The country holds the world’s fifth- largest crude reserves, according to BP Plc (BP/), and is the biggest producer, after Saudi Arabia, in the Organization of Petroleum Exporting Countries.
Iraq initially set a long-term goal of pumping 12 million barrels a day. Political tensions and violence have slowed its recovery, and the government has since decreased its overall target to levels ranging from 6 million to 10 million barrels a day. Its efforts to cut targets at individual fields are related to infrastructure issues and the nationwide reduction in planned output, Grigory Volchek, a Lukoil spokesman, said Dec. 27.
Al-Ameedi said the Oil Ministry extended Lukoil’s licensing period by five years, to 25 years, and lengthened the company’s “production plateau” to 19.5 years from 13 years, under an agreement the two sides signed today in the Iraqi capital.
“The modified provisions of the project provide for realization of Lukoil’s production and economic targets, while the risks emerging in the course of implementation of the project are considerably reduced,” Lukoil’s billionaire Chief Executive Officer Vagit Alekperov said in a statement today.
Al-Ameedi said Lukoil, based in Moscow, holds 75 percent of West Qurna-2 after Statoil (STL) SA withdrew last year, with Iraq’s government retaining the rest.
Lukoil continues to search for a replacement for Statoil and sees China as an “attractive partner,” Alekperov said Jan. 15. West Qurna-2 is on track to start producing early next year, Mahmud Abdulamir Hashem al-Luaibi, deputy director general of Iraq’s state-owned South Oil Co., said by phone today from the southern city of Basra.
BP Plc has expressed interest in developing Iraq’s oldest oil field at Kirkuk in the north and has been negotiating with the government for about two years, Al-Ameedi said. No agreement has been reached on Kirkuk, he said.
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