The Iraqi government has awarded a contract to Russian oil major LUKoil and its Norwegian partner Statoil to develop for expansion of the West Qurna Phase 2 oil field, one of the country’s largest. The site has known reserves of around 13 billion barrels of oil.
“We are happy to have secured an important position in Iraq and look forward to further cooperation with LUKoil and Iraqi partners. Our attention now is on a safe and responsible development of the field, creating long term value both for Iraq and the companies,” President and CEO of Statoil Helge Lund said.
The Cabinet of Ministers of Iraq has ratified the contract. The contract validity period is 20 years with an opportunity of extension for five years. The parties to the contract are the state Iraq’s South Oil Company and the consortium of contractors consisting of the state Iraq’s North Oil Company (25%), LUKoil (56.25%) and Statoil (18.75%).
Drilling on West Qurna 2 will start in 2011 and first production is expected at the end of 2012. The target production level is expected to be achieved in 2017, and will be held for 13 years. The field development plan provides for additional seismic acquisition and drilling of more than five hundred wells.
“These contracts will bring in cash to Iraq, and move ahead plans to develop the infrastructure,” said Oil Minister Hussain al-Shahristani, adding that the deals afforded Iraqis the chance to “look toward a bright future.”
Production from oil wells in southern Iraq will rival that of Saudi Arabia or Russia in six years, al-Shahristani said.
Basra’s “crude oil production will reach 10 million barrels a day in the next the next six years,” he said. That production rate would be “comparable to that of large countries like Saudi Arabia and the Russian Federation,” al-Shahristani said.
Together with previous deals to develop the nearby Zubair, Rumaila and West Qurna Phase I fields, the region around Basra “will be among the world’s leading regions in the production and export of crude oil during the next six years,” al-Shahristani said.
Iraq currently produces 2.5 million barrels per day, but over the past six months has announced it has signed 10 contracts with some of the world’s largest energy companies in a bid to boost production to 12 million barrels per day by 2016. Saudi Arabia produced 10.8 million barrels per day in 2008. Only Saudi Arabia and Iran have proven reserves of oil larger than Iraq’s 115 billion barrels.