Nationalization in Iraq: how Lukoil lost its largest foreign asset
9 January 09:17
The Iraqi government has approved the nationalization of the operator of the West Qurna-2 oil field, 75 percent of which is owned by the Russian company Lukoil, Reuters reports, according to "Komersant Ukrainian".
Management of the field will be transferred to the state-owned company Basra Oil for a period of 12 months, two company representatives told Reuters. One of them said that the decision was aimed at ensuring uninterrupted oil production amid uncertainty related to US sanctions, as well as finding potential buyers for Lukoil’s stake during this period.
The significance of the field and the sanctions background
West Qurna-2, one of the largest oil fields in the world, accounts for about 0.5 percent of global oil supplies and about 9 percent of Iraq’s production. In November, Lukoil declared force majeure at the field after the Iraqi government stopped paying the company in cash and oil.
The US set a deadline of January 17 for Lukoil to exit its foreign assets after imposing sanctions on the company and Rosneft at the end of October.
Production and operations
After the operator’s transfer to Basra Oil, the company will pay salaries, ensure the work of contractors, and bear operating costs, an Iraqi oil manager told Reuters. According to him, production at the field remains stable at around 465-480 thousand barrels per day.
Lukoil obtained the right to develop West Qurna-2 in 2009, and commercial production at the field began in 2014.
Investor interest in Lukoil’s assets
Several oil and investment companies have previously expressed interest in acquiring Lukoil’s foreign assets.
One of the latest offers was the intention of Chevron and the private equity fund Quantum Capital Group to acquire Lukoil’s entire portfolio of foreign assets, including production projects, oil refineries, fuel storage facilities, and more than 2,000 gas stations in Europe, Asia, the US, and the Middle East.
