UPDATE: Lukoil, Conoco Agree Terms For Iraq's West Qurna-1
14 October 2009 - 3:12AM
Dow Jones News
U.S. oil major ConocoPhillips (COP) and Russian oil firm OAO
Lukoil Holdings (LKOH.RS) have agreed to accept the terms set by
Iraq to develop the West Qurna-1 oil field in southern Iraq, Lukoil
said Tuesday.
"We have accepted the previous conditions set out by Iraq's Oil
Ministry and will start talks tomorrow in Baghdad," a Lukoil
spokesman said.
In a joint bid, Lukoil and ConocoPhillips accepted the
ministry's initial terms of a maximum remuneration of $1.90 a
barrel of extra oil produced offered at an auction in June.
Iraq's first attempt in June to auction off contracts for eight
fields to foreign companies proved unsuccessful due to the
unattractive financial terms offered.
Lukoil and ConocoPhillips were among the companies that declined
to accept the conditions offered then, but changed their minds due
to a recovery in the oil price from levels seen at the start of the
year, the Lukoil spokesman said.
"We decided to review the terms, taking higher oil prices into
consideration," the spokesman said. He declined to say how much it
would cost to develop West Qurna-1, which has proven crude oil
reserves of 8.6 billion barrels. He also didn't say when a contract
could be signed.
A senior Iraqi Oil Ministry official said last week it hoped to
award the license for West Qurna-1 by the end of October or early
November.
Lukoil's Chief Executive Vagit Alekperov met Iraq's Oil Minister
Hussein al-Shahristani in Baghdad last Tuesday.
Moscow-based Alfa Bank suggests Lukoil and ConocoPhillips may
have agreed to a low margin deal in Iraq to position themselves for
future deals in the oil-rich country. "This could give them a huge
operating base in Iraq, which may lead to more lucrative deals down
the road," said Alfa Bank analyst Ron Smith.
In 1997, Lukoil signed a multibillion dollar contract to explore
the West Qurna-2 oil field but was expelled before the invasion of
Iraq because of disagreements with the Saddam Hussein regime.
Lukoil is hoping to revive that deal.
A rough estimate by Alfa Bank shows that West Qurna-1 field
might add some 2% to Lukoil's total Ebitda.
Lukoil - is 20%-owned by ConocoPhillips - is Russia's second
biggest oil producer with daily output of 1.91 million barrels.
Company Web site: www.lukoil.com
-By Jacob Gronholt-Pedersen, Dow Jones Newswires; +7 495 937
8445; jacob.pedersen@dowjones.com