Iraq eyes big rebound

Oil project run by Dubai-based Russian group a boon for economy

The West Qurna oilfield in Basra on Saturday. Lukoil, which last year moved its international headquarters to Dubai as it seeks to generate greater oil production outside of Russia, says if this oilfield fulfils target oil production, it will be its highest-yield oilfield. — Reuters

The first oil production of what could be the world’s fourth-largest oil project, run by a Dubai-based Russian consortium, has been officially marked by top politicians who say the project signals the resurgence of Iraq.

Lukoil, which last year moved its international headquarters to Dubai as it seeks to generate greater oil production outside of Russia, says if its West Qurna 2 oilfield in Basra fulfils target oil production, it will be its highest-yield oilfield, expected to produce up to 1.2 million barrels of oil per day by 2018. Since Friday, it has been producing 120,000 barrels a day.

Speaking at Saturday’s inauguration, Russian Deputy Prime Minister Arkady Dvorkovich said: “Even for Russia this volume is big and it’s a great success.”

Companies from the UAE are among some of those from 20 different countries that helped in the oilfield’s two-year construction, which required 11,000 employees at its peak.

Dvorkovich read a letter from Russian President Vladimir Putin intended for Iraqi Prime Minister Nouri Al Maliki, who was a no-show at the event.

“We are committed to assisting Iraq in its rehabilitation.”

He said they would help the country overcome terrorism threats “which are the most serious challenges not only for your country but for the entire Middle East”.

The inauguration comes amid moves by the US to reduce European dependence on Russian energy supplies, in the wake of the Crimean crisis.

Iraqi Energy Deputy Prime Minister Hussain Al Shahristani said the launch was a happy occasion for the whole country.

“[Some] thought that Iraq would not have such a big industrial development in such a short time. But we betted that we have the will of Iraqis. We have the efficiency and the proficiency of the companies selected and Lukoil was the foremost of these.”

Iraqis who had lost land through the oilfield development would be compensated “even more than the price of their land”, and all would now reap benefits from development after a long period of suffering.

“You have been very patient but it’s now time to enjoy the wealth and resources in your land and I recommend the oil companies [foreign and Iraqi] should give special attention to giving social services to the people living here and there must be expenses given for the social services in this region.”

Lukoil Group president Vagit Alexperov said the field was the largest oilfield in the world that remained untapped.

“This is a historical moment, this is a moment for Iraq’s recovery and the relations between our countries [as well as the company],” he said.

The 340sqkm field is the fourth-largest oil project in the world by target oil plateau production. Iraq, which ranks fourth by oil reserves and 12th in production, has some of the world’s most unexplored and untapped oil reserves.

Alexperov said the project happened faster than expected and targets had been achieved despite a tight deadline. It was a boon for Basra’s workforce with as many as 6,500 employed during construction and 398 continuing at the plant, out of the almost 1,200 staff currently working. Of those, 310 received training from Lukoil.

“We established the socially-responsible environment. We are proud that [the project generated employment] on this scale.”

Lukoil has a 75 per cent stake in the project, while the Iraqi state oil company has the remainder.

The Russian company, running since 1991, carries out oil and gas exploration in more than 30 different countries, largely throughout Eastern Europe.

Iraq does not have the capital necessary to develop the infrastructure necessary, much of which has been taken on by foreign petroleum companies. Lukoil has the contract for the West Qurna 2 oilfield until 2035.

Iraq’s Oil Minister Abdul Karim Luaibi said the country was hoping to reach unprecedented levels of oil production this year.

“We hope to celebrate four million barrels a day by the end of this year.”

By the end of the year, it is expected West Qurna 2 will be contributing 400,000 million barrels a day.

UAE involvement

Lukoil has also been in consultation with the UAE government to explore opportunities for development of petrochemicals here.

Lukoil Overseas president Andrey Kuzayaev said he had recently met with UAE government ministers.

“We’ve been discussing various options for our cooperation so we’ve agreed to set up a work group to study the potential for our cooperation. We’ve been invited to review projects.”

The working group consists of Lukoil, the Ministry of Energy and Abu Dhabi government investment company Mubadala.

Reporting from BASRA