Russian Majors Review Iraqi Projects

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A Russian delegation to Iraq last week to discuss trade and economic cooperation between the two countries had tough talks with Baghdad, sources say. Russian oil companies investing in Iraq are deeply dissatisfied with slow decision-making, thin margins and compensation delays among other challenges they face in the country. CEOs of Lukoil and Gazprom Neft, Vagit Alekperov and Alexander Dyukov, were part of the delegation headed by Deputy Prime Minister Yuri Borisov who co-chairs the intergovernmental commission on trade, economic, scientific and technical cooperation between the two countries. Alekperov made it clear that radical changes would be needed if the company were to maintain its long-term engagement with Iraq, sources in the country say. Lukoil's mounting frustration has been fueled by the failure of Baghdad to commercialize the 3.7 billion bbl Eridu discovery the Russian major made at Block 10, and to approve the field's development plan (NC Nov.5'20). Lukoil has spent years negotiating to improve the terms for its West Qurna-2 project it launched in 2014 but with little success so far. Sources in Russia claim that Lukoil would not follow suit of Exxon Mobil that decided to sell its 32.7% operatorship stake in Iraq's 490,000 b/d West Qurna-1 field. However, all expansion plans for Lukoil's West Qurna-2, including an increase in production from the Mishrif formation to 450,000 b/d from the current capacity of 400,000 b/d, have been frozen, insiders confirm. Lukoil could also shelve plans to develop the Yamama formation that was supposed to add another 350,000 b/d to bring total production up to 800,000 b/d (NC Oct.22'20). Lukoil Vice President Leonid Fedun told Energy Intelligence this week that "we will see" whether to expand West Qurna-2 further. He also noted that much would depend on Opec-plus decisions that also regulate production at Lukoil's fields in Iraq. Russian experts on Iraq say that the situation in the country is only worsening but Baghdad would like to keep Russian investors. The Iraqi side is expected to attend the St. Petersburg International Economic Forum at the beginning of June to agree on some deals. The deals could include memorandums with Gazprom Neft on gas projects, sources say. During the talks in Iraq last week, Gazprom Neft discussed possible involvement in gas supplies to Baghdad from the Topkhana and Kurdamir blocks in Iraqi Kurdistan. But Gazprom Neft does not currently hold a stake in either Topkhana or Kurdamir, which are led respectively by Spain's Repsol (80%) and Canadian minnow Western Zagros (80%). Both companies are partners with Gazprom Neft on other projects. With Western Zagros, Gazprom Neft is jointly working on the Garmian Block in Kurdistan (NC Apr.22'21). Gazprom Neft did try to invest in Topkhana and Kurdamir back in 2017-18, but it's unclear if there have been any discussions since. The Russian company already has gas experience in Iraq. It built a gas pretreatment plant as part of a contract to develop the Badra oil field in the south of the country. The 1.6 Bcm/yr plant was designed for the compression, treatment and dehydration of associated petroleum gas from Badra. Gas flows through the 100 km gas pipeline connecting Badra to the power station in Zubaidiah in the Wasit province in eastern Iraq. Gazprom Neft was looking at Iraq's 300 MMcf/d Mansuriyah gas project but lost the bid to China's Sinopec.

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