Category: Russia
Posted on 27 November, 2021
Block 10 More Attractive for Lukoil than West Qurna 2
Writing in Oil Price, Simon Watkins points out that the $5.99-per-barrel remuneration that Lukoil will receive under its technical service contract at Block 10 is considerably better than its $1.15/barrel payment at West Qurna 2.
Block 10 includes the Eridu field, which has indicated oil reserves of between 7 and 12 billion barrels, and a proposed peak production rate of 250,000 barrels per day (bpd).
Lukoil has a 60-percent stake in Block 10, with Inpex owning 40 percent.
The post Block 10 More Attractive for Lukoil than West Qurna 2 first appeared on Iraq Business News.
Chevron's Oil Deal with Iraq "is One to Watch"
Writing in Oil Price, Simon Watkins says that, given the negative history of dealing with China over the Nassiriyah project and the fact that Russia is occupied elsewhere in the country and the region, the United States might be in an unusually positive position to take a significant role in either the Nassiriyah field development alone or in the broader Nassiriyah Integrated Project (NIP).
The post Chevron's Oil Deal with Iraq "is One to Watch" first appeared on Iraq Business News.
LUKoil files Development Plan for Iraq's Eridu Oilfield
Russia's LUKoil and Japan's Inpex Corporation have applied to Iraq's state-owned Dhi-Qar Oil Company (DQOC) for what Lukoil describes as "commerciality of reserves", and filed a preliminary proposal on the development of the Eridu oil field within Block-10.
According to Lukoil, geological exploration has proved significant reserves, making Eridu the largest discovery in Iraq in the last twenty years.
Oil Minister Ihsan Abdul Jabbar told the Iraqi News Agency (INA), that "the results of the exploration for the Arido field are good ... Lukoil requested an extension of the period to obtain greater reserves."
The Eridu field was discovered in 2016. Preliminary expectations based on studies presented by the Lukoil indicate oil reserves of between 7 and 12 billion barrels, and a proposed peak production rate of 250,000 barrels per day (bpd).
(Sources: Lukoil, INA, Ministry of Oil)
The post LUKoil files Development Plan for Iraq's Eridu Oilfield first appeared on Iraq Business News.
West Qurna-2 produces its One-Billionth Barrel of Oil
Iraq's West Qurna-2 oilfield has just produced its one-billionth barrel of oil.
At a ceremony to mark the event, which was attended by Lukoil President Vagit Alekperov, Oil Minister Ihsan Abdul Jabbar said the field started with production of 220,000 bpd, rising to 400,000 bpd, with plans for peak production of 800,000 bpd in 2027.
He added that the field had contributed more than 40 billion dollars to the national economy.
(Sources: Ministry of Oil, Lukoil)
The post West Qurna-2 produces its One-Billionth Barrel of Oil first appeared on Iraq Business News.
Posted on 15 October, 2021
Iraq tries to persuade Lukoil to stay at West Qurna
Oil Minister Ihsan Abdul Jabbar has reportedly told reporters that Iraq hopes LUKoil will keep its stake in the West Qurna-2 oil field.
Russian news agency TASS quotes the Minister as saying that Iraq is "negotiating improvement of conditions" for the project.
In July, Lukoil Chief Executive Vagit Alekperov was quoted as saying that the company may reduce its stake in the field.
(Source: TASS)
The post Iraq tries to persuade Lukoil to stay at West Qurna first appeared on Iraq Business News.
LUKoil Confirms possible Reduction of Stake in West Qurna-2
The Chief Executive of Russia's LUKoil has reportedly confirmed that the company may reduce its stake in Iraq's West Qurna-2 oil field.
Reuters cites Vagit Alekperov as making the comment on Thursday during a visit to the company's facilities in Nizhny Novgorod.
(Source: Reuters)
The post LUKoil Confirms possible Reduction of Stake in West Qurna-2 first appeared on Iraq Business News.
IOC's Strategic Positioning in Iraqi Upstream Petroleum
IOC's Strategic Positioning in Iraq Upstream Petroleum
Much talk have been circulating recently on "Big Oil" abandoning Iraq upstream petroleum projects after they rushed into the country many years ago. How much truth is in this; who is leaving, remaining and planning a comeback; why and what material evidences are available to provide verifiable realistic explanation are some of the topics this brief intervention attempts to address.
IOCs positioning in Iraq upstream petroleum have seen a dramatic shift since a Grand Opining Big Push Policy- GOBPP was pursued in 2004; offering IOCs opportunities to achieving unprecedented expansion in the petroleum production capacity during short period.
Their involvement and strategic positioning went through three phases: the first, 2004 to end 2008, comprises many memoranda of understanding/cooperation (MoU/Cs ) in search for foothold and as springboard for further opportunities; transparent competitive bidding phase, June 2009 to May 2012, includes four bid rounds and, third phase covers contracts implementation that began from January 2010 up to date.
Ministry of Oil- MoO concluded some 40 MoU/Cs with IOCs from 23 countries, with overwhelming dominance of the US (9); Japan and Norway (4 each); China, UAE, UK and Canada (2 each) and one company from 16 countries.
For IOCs, MoU/Cs represent invaluable direct contact with Iraqi staff and professionals at all layers of responsibility and access to most archives and database relating to upstream petroleum; that helped IOCs exploring where and what they could do to chart their way towards business in Iraq's upstream petroleum and beyond, i.e., to plan their strategic positioning in the sector. Some IOCs had their MoU/C terminated and were blacklisted from further involvement in upstream petroleum projects, due to their agreements with KRG in violation of the government declared policy.
MoU/Cs contributed in formulating and development of a model contract, and by the time they were terminated MoO succeeded, through direct government-to-government talks (with China), in converting Alahdab oilfield from production sharing to service contract. That conversion presents the model for what MoO offers: a long term service contract not a production sharing contract; an outcome many IOCs had not hoped for and probably impacted their decision for further undertaking.
The first bid round, for brown oilfields, was held end June 2009, followed by three bid rounds for green fields, gas fields and exploration blocks respectively; the last was convened end May 2012.
120 IOCs participated in the qualification process for the bid rounds, 55 from 27 countries were qualified: Japan (9); USA (7); Russia (5); China and UK (4 each); Australia, India and Italy (2 each), and 19 other countries with one company each; a different profile from phase one with obvious strategic positioning implications.
The outcome of the four bid rounds and Alahdab are: 14 oilfields contracted to 15 IOCs from 12 countries; a consolidation of strategic positioning. Total contracted plateau production was 12.3mbd and their total proven reserves ca. 67 billion barrels (58% of the country's proven reserves at that time). Three gas fields were contracted to 3 IOCs from 3 countries with total plateau production of 820mcfd and proven reserves of 11.2tcf. Finally, four exploration blocks were contracts with 7 IOCs from 5 countries resulting in discovery of Fayha and Eridu oilfields.
The contracted plateau production of 12.3mbd was IOCs making that proven to be unrealistic and unattainable, thus, consequently revised downward repeatedly!!
During the second phase many meaningful signs for significant shift in IOCs strategic positioning began to emerge, the most apparent consolidation was Russia.
The third phase, i.e., contracts implementation period, witnessed the most dramatic effective and lasting shifts in IOCs strategic positioning.
A complexity of combined reasons had contributed to such an outcome; some are related to IOCs themselves, others related to the Iraqi side (entities, policies and circumstances), while the rest are related to a variety of international factors and geopolitical considerations. Space limitation prevents from indulging in the details of relevant data, facts and documents, but it is useful to mention the most impacting among them: Fracking revolution in the US; ISIS and oil price collapse in mid-June 2014 that inflicted serious blow to Iraq fiscal, security and developmental efforts; OPEC+ impact on Iraq production; Covid-19 and finally energy/green transition and climate change debate.
However, it is vital to highlight briefly the IOCs that strengthened or weakened their positions during this phase.
In the context of Iraqi GOBPP, strategic positioning is taken here to mean IOCs persistent, competitive, enhanced and long-term underrating in Iraq upstream petroleum. Three dimensions manifest IOC involvement and its strategic positioning: horizontal (in multi-fields), vertical (the participating interest-PI in the fields) and volumetric (in terms of proven reserves and production due to field development).
From November 2013 China began enhancing its presence in the country through consolidating CNPC , CNOOC, ZhenHua , Sinopec , UEG and probably CPECC, which invests in utilizing all associated gas produced in Missan Province . In addition to the above, there are many Chines service companies that are involved in upstream petroleum activities such as drilling, supply and construct surface installations, pipelines, field management among others.
Russian Lukoil enhanced its position vertically horizontally and volumetric in West Qurna 2-WQ2 oilfield and in exploration Block 10 that led to Eridu oilfield discovery; Lukoil found other reservoirs beyond the field's current borders and thus requested to expand Eridu field. Surprisingly, the Oil Minister reportedly said recently Lukoil intends to sell its PI in WQ2 to a Chines company!
Other Russian IOCs with bid round contracts include Gazprom (operator of Badra oilfield) and Bashneft/ Rosneft (for Exploration Block 12), KRG not included here.
In addition to Chines and Russian IOCs Japanese companies increased their presence as well: Japex (Gharraf oilfield); INPEX (Exploration Block 10/Eridu oilfield) and Itochu bought entire Shell' PI (20%) in WQ1.
Against the consolidation of the Chines, Russian and Japanese companies, other IOCs lost or weakened their presence in upstream petroleum; these include Big Oil- as ExxonMobil, Shell and Oxy and medium-small size companies such as Petronas, Kogas, Kuwait Energy, TPAO.
Occidental Petroleum relinquished, in 2016, its PI in Zubair oilfield to South Oil Company (now Basra Oil Company), due to its decision pulling out from projects in the Middle East for financial reasons.
ExxonMobil demise began almost ten years ago soon after it had attained significant consolidation; a demise of its own making!! Apart from the contribution of the Iraqi factors ExxonMobil faced and facing many other challenges that exacerbate its decision to abandon Iraq. These include restructuring its international profile; energy transition (away from fossil-based to renewable-energy) environmentally-conscious; shareholder revolts, expulsion of ExxonMobil representative from EITI'MSG due to position regarding Dobb-Franck issue and the forthcoming SEC environmental compliance rules.
Royal Shell story is not very different from that of ExxonMobil. Shell launched initially a powerful strategic positioning, resisted the temptation of engaging with KRG petroleum and diversified its portfolio in oil, gas and petrochemical projects. Now it has much weakened role; withdrew from Majnoon oilfield, sold its PI in WQ1, rumors that it contemplate leaving Basra Gas Compan- BGC , whose HoA was signed in 2008 but it did not deliver the contracted target, and Nibras petrochemical project, with MIM & MoO, draggeed for too many years without any prospect.
Again, Shell decision to leave WQ1 and Majnoon oilfields and possibly BGC was not entirely due to contractual and working conditions in Iraq; one possible explanation relates to Shell' overall plan to restructure its global business, following its takeover of British Gas Group- BGG. Also Shell faces legal action; A Dutch court ruled, recently, that Shell will have to reduce its carbon emissions by 45 percent from 2019 levels by 2030.
BP has only one engagement- Rumaila oilfield, with almost equal PI with CNPC (while during the June 2009 bidding round BP' PI was double that of CNPC). Recently, BP decided to spin off its involvement in Rumaila into a stand-alone company, a "ring fencing practice", for reasons relating to diverting its global assets and investment plans. Though this move is more structural and organizational in nature that has, contractually, no effect on Iraq, it, nevertheless, could indicate possible departure from Rumaila sooner or later.
Total, rebranded TotalEnergies, have very modest PI in only one oilfield- Halfaya, is trying a comeback to Iraq through concluding HoA comprising four major projects, three of which are part of SIIP that Iraq wasted too many years discussing with ExxonMobil!!
Surely, IOCs strategic positioning has significant implications for petroleum sector and the prospect of the entire economy. There has been a tendency for some to be highly selective by focusing only on one Iraqi based, real reason, such as harsh contractual terms; type of contracts; corruption, resource mismanagement and security conditions among others. While all these are real and effective, they are absolutely not the only factors behind IOCs shift and change of priorities as there is a complex wed that one should be aware of; 20 IOCs have recently warned for tax violation and IOCs that lost their strategic positioning inside Iraqi petroleum had themselves contributed to that outcome.
Moreover, global energy/green transition and international geopolitics have powerful ramifications though the debate is, as usual, not conclusive. While IEA recent report could have effective impact, REN21 new report raises doubt; and such wide divergence suggests oil remains needed much longer than some thinks.
The post IOC's Strategic Positioning in Iraqi Upstream Petroleum first appeared on Iraq Business News.
Posted on 7 July, 2021
China to Snap Up Iraqi Oil Assets?
Both BP and Lukoil are reported to be considering quitting upstream oil operations in Iraq.
Reuters quotes Iraq's Oil Minister, Ihssan Abdul-Jabbar Ismail, as making the comments during a parliamentary session last week.
Last month, BP was said to be planning to spin off its Iraqi operations in Iraq into a separate company, which would be jointly owned with its partner in the giant Rumaila project, the China National Petroleum Corporation (CNPC).
Meanwhile, the Minister said Russia's Lukoil is thought to be trying sell its 75-percent stake in the West Qurna-2 oilfield to Chinese firms.
(Sources: Reuters, Oil Price)
The post China to Snap Up Iraqi Oil Assets? first appeared on Iraq Business News.
Posted on 7 June, 2021
LUKoil announces Plans for Iraq's Block 10
The head of Russia's LUKoil has said that the company plans to start production at Iraq's Block 10 at the end of 2022 or in 2023.
Vagit Alekperov (pictured) told a Reuters that output will start at 30,000 barrels per day (bpd).
The field is being developed by LUKoil (60%) and Inpex (40%)
The post LUKoil announces Plans for Iraq's Block 10 first appeared on Iraq Business News.
Increasing Oil Production at West Qurna 2
Iraq's Oil Minister, Ihssan Abdul-Jabbar Ismail, has announced the start of experimental operations at the Yamamah reservoir in the West Qurna 2 oil field, with the aim of increasing output from the reservoir from 10,000 barrels per day (bpd) to 350,000 bpd.
When fully implemented, the development would bring total production at the field to 800,000 bpd.
The Minister praised the work of Russian company Lukoil, which is developing the field.
(Source: Ministry of Oil)
The post Increasing Oil Production at West Qurna 2 first appeared on Iraq Business News.