The Iraqi cabinet on Tuesday approved an "amicable settlement" with Russia's Lukoil over the transfer of operations of the giant West Qurna-2 oilfield to the state-run Basra Oil Company, according to a statement.
In November, Lukoil declared force majeure at the field after being hit by US sanctions alongside Rosneft, as part of President Donald Trump’s push to increase pressure on Russia over the war in Ukraine.
Force majeure refers to unforeseen circumstances that prevent a party from fulfilling contractual obligations.
Last month, Iraq nationalised the oilfield and instructed BOC to manage the operations. Afterwards, BOC hired oil service companies – Italian engineering company Bonatti and local firm Hilal Al Basra – under a six-month agreement that is renewable once, according to a February 2 letter sent to Lukoil seen by The National.
The settlement includes issues related to invoices and employment of foreign staff endorsed by a reputable external auditor, as well as income tax on foreign staff, the government statement said.
Lukoil agreed last month to a conditional sale of some overseas assets to US private equity firm Carlyle. The sale of Lukoil’s assets depends on receiving regulatory approval, including clearance from the US Office of Foreign Assets Control, and excludes its holdings in Kazakhstan.
Lukoil also holds a 60 per cent interest in Iraq’s Block 10 (Eridu) and a 50 per cent stake in Egypt’s West Esh El Mallaha fields.
West Qurna-2 is one of the world’s largest oilfields, producing an estimated 460,000 to 480,000 barrels per day, nearly 9 per cent of Iraq’s output and about 0.5 per cent of global oil supply. It is estimated to hold about 14 billion barrels in reserves.
Iraq, Opec's second-largest producer, has plans to raise its output capacity to six million bpd by 2029 after years of war, sanctions and underinvestment.
With the exit of Lukoil from Iraq, US oil company Chevron is interested in a stake in West Qurna-2 and talks are continuing with the Iraqi Oil Ministry.
