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02 October 2023

Iraq signs mega deal with Russian, Norwegian firms


By Reuters

Iraq signed a contract yesterday with Russia's Lukoil and Norway's Statoil to develop one of the world's biggest oilfields, sealing the last of 10 deals that could turn the war-shattered country into a top oil producer.

Analysts had expected Iraq and energy firms which won bids at oilfield auctions last year to move quickly to sign final agreements before a March 7 election, a pivotal vote as Iraq emerges from the conflict set off by the 2003 US invasion.

The government wanted to push the deals through in order to show voters it had lined up huge investment and the promise of large increases in public revenue, said IHS Global Insight Middle East Energy analyst Samuel Ciszuk.

The companies, meanwhile, could afford to clinch the deals rapidly as they still had plenty of time to see what the next Iraqi government would be like before the contracts obliged them to start investing heavily in the fields, he said.

"The first chapter seems closed, the second chapter will be opened after the election and then, of course, there will be those challenges of a more physical nature," said Ciszuk.

Lukoil and Norway's Statoil sealed the 20-year deal to develop West Qurna Phase Two, a 12.9 billion barrel supergiant oilfield in the south, in an auction in December.

Statoil, which has a 25 per cent stake in the firms' side of the venture, has said it would invest $1.4 billion (Dh5.13bn) over four to five years. Lukoil put the investment "in the billions".

The 10 deals could vault Baghdad to second place in the ranks of global oil producers, rivalling Saudi Arabiam and could more than quadruple oil output capacity to 12 million barrels per day (bpd) from the current 2.5 million bpd.

However, implementing an oil contract is far more difficult than signing one and in addition to political uncertainty as a result of the election, Iraq continues to present serious challenges for investors.

Violence has fallen in the past two years but attacks by suspected Sunni militants or Shi'ite militia remain common.


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