Chevron has secured one year of exclusive negotiation rights to take over operatorship of Iraq's West Qurna 2 oil field from Russia's Lukoil. The move follows U.S. sanctions on Lukoil and Rosneft, and Iraq reportedly expects Chevron to double the field's output.
Chevron secured one year of exclusive negotiation rights last week to finalise the commercial and operational terms for taking over operatorship of Iraq's West Qurna 2 oil field. The U.S. company made an advance of $200 million on a prospective signing bonus, according to local media sources, which a senior source close to Iraq's Oil Ministry later confirmed to OilPrice.com.
Sanctions push Lukoil out
West Qurna 2 was one of four preliminary agreements Chevron signed with Iraq's Oil Ministry in February. The others covered the Nasiriyah field, four exploration blocks in Dhi Qar province and the Balad field in Salahaddin province.
The shift came after the U.S. Treasury added Lukoil and Rosneft to its Specially Designated Nationals and Blocked Persons List. Lukoil left West Qurna 2, and Rosneft downgraded its presence in northern Iraq. Between them, the two Russian firms were exporting approximately 3.1 million bpd.
A field with room to grow
The field sits 65 kilometres northwest of Basra and holds roughly 14 billion barrels of reserves in place. Under Lukoil, it produced around 400,000 barrels per day, about 9% of Iraq's total oil production at that time.
A senior source close to the Oil Ministry told OilPrice.com that the government expects Chevron to double output within a relatively short time. The working figure for peak production is now 0.8 million bpd, compared with 1.2 million bpd under Lukoil's original contract.
Iraq's appeal extends beyond one field. The country holds 145 billion barrels of proven crude oil reserves, a very conservative estimate by OilPrice.com's account, and an average lifting cost of just $1-2 per barrel. Chinese companies, meanwhile, control around 34% of Iraq's proven reserves.
Corruption risks remain a complicating factor, which is why Chevron is working through the details of its final contract with the Oil Ministry. Chevron CEO Mike Wirth said the company is months away from finalising the definitive, long-term contract.
Source: Oilprice.com
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