Russia's Lukoil to invest $4 bn in Iraqi oil field

Russia's second-largest oil producer Lukoil plans to invest approximately $4 billion in giant West Qurna-2 oil field in southern Iraq, Russian news agency RIA Novosti reported yesterday.

On the sidelines of the Organisation for Economic Cooperation and Development (OECD) forum in Paris on Tuesday, Lukoil's vice-president Andrei Kuzyayev said: ''We'll invest $4 billion in West Qurna. We plan to produce the first oil at the end of this year and at the beginning of next year.''

The company has taken all necessary investment and financial decisions to develop the West Qurna-2 project, he further stated.

Global oil giants from the US, UK, Russia, China and Japan have all been competing in the auctions for gaining a foothold in oil-rich Iraq and develop the country's vast resources, as oil output is making a sharp rebound a decade after the US-led invasion.

Iraq, with a production level of around 3.1 million barrels per day (bpd) of crude oil as of April, is nearing the record output registered in 1979.

According to International Energy Agency's (EIA's) October forecast, Iraq's crude oil output is expected to reach 6.1 million bpd by 2020 and 8.3 million bpd by 2035.

In 2010, Russia's largest private sector oil company Lukoil secured a 75-per cent stake in West Qurna-2, a vast oilfield in Basra province, with Iraq's state-owned North Oil Company holding the remaining 25 per cent.

Lukoil signed a 20-year contract to develop the resources, which has recoverable oil reserves of about 14 billion barrels. The targeted production from the field is 1.2 million bpd of crude oil.

The oil major seeks to expand internationally to compensate for its stalling growth in Russia.

Yesterday Lukoil reported a one-third drop in its net profit for the first quarter compared to last year on the back of the fall in crude oil prices and higher operating costs.

Net profit for the quarter was $2.58 billion, down 32 per cent from $3.79 billion a year ago. Revenue fell over 4 per cent to $33.8 billion from $35.3 billion last year.

The average price of Urals crude, the country's benchmark export blend, dropped more than 5 per cent in the first quarter from last year, according to Lukoil.

Production of crude oil and gas was stagnant at around 2.2 million barrels of oil equivalent per day.

Capital expenditure during the quarter was $3.4 billion, up from $2.5 billion a year earlier.

As part of its growth plan, the company recently completed its acquisition of Samara Nafta, the Russian subsidiary of US oil and gas major Hess Corp for approximately $2.05 billion.