“Lukoil declared force majeure and stopped production at the largest field in Iraq: what is known
10 November 21:36
The Russian oil giantLukoil has declared “force majeure “at one of Iraq’s largest oil fields, West Qurna-2, and temporarily suspended its operation. This was reported by Reuters, according to "Komersant Ukrainian".
In a letter to the Iraqi Ministry of Oil, the company cited “force majeure circumstances” that, according to it, make it impossible to continue normal operations at the field.
What’s behind the decision
According to Reuters, after the United States and the United Kingdom imposed sanctions on Lukoil last month, Iraq suspended all cash and oil payments to the company. This effectively blocked its financial flows on the ground.
The Russian company owns 75% of the West Qurna-2 project, the rest belongs to the state-owned North Oil Company. The field’s production was about 480 thousand barrels per day, making it one of the largest in the region.
What are the consequences for Iraq and Russia?
If the situation is not resolved within six months, Lukoil may finally stop working and withdraw from the project, said a representative of the Iraqi oil sector. This will pose risks to the energy stability of Iraq, which relies on foreign companies to develop large fields.
For Russia, this is another blow to the oil industry, which is already facing export restrictions due to Western sanctions.
A new wave of sanctions
Washington has tightened restrictions against the Russian energy sector due to the war in Ukraine. The sanctions affected Rosneft and Lukoil, which are formally due to come into effect on November 20, but are already affecting the companies’ operations.
Some refineries in India, key buyers of Russian oil, have announced plans to cut imports. Meanwhile, there have been reports in the media that Lukoil is considering selling its foreign assets to the Swiss company Gunvor.
If Lukoil is unable to reach an agreement with Iraq or find a way around the payment blockade, this could be the first major withdrawal of a Russian company from a major international energy project since the start of the full-scale war in Ukraine.
