Iraq confirms rejection of oil contract with LUKoil

Nov 07, 2007 01:00 AM

Guided by US legal advisers, the Iraqi government has cancelled a controversial development contract with the Russian company LUKoil for a vast oil field in Iraq's southern desert, freeing it up for potential international investment in the future.
In response, Russian authorities have threatened to revoke a 2004 deal among the Paris Club of creditor nations to forgive $ 13 bn in Iraqi debt, a senior Iraqi official said.

The field, West Qurna, has estimated reserves of 11 bn barrels, the equivalent of the worldwide proven oil reserves of ExxonMobil, the largest US oil company. Hussain al-Shahristani, the Iraqi oil minister, said that the field would be opened to new bidders, perhaps as early as next year.
The contract, which had been signed and later cancelled by Saddam Hussein's government, had been in legal limbo since the US invasion. But the Kremlin remained hopeful it could be salvaged until September, when Shahristani travelled to Moscow to inform officials there that the decision to cancel it was final, he said.

The Russian government, newly emboldened in international affairs by its expanding oil wealth, is still backing LUKoil’s claim and protesting what it considers selective enforcement of contracts in Iraq.
"We will defend our interests," Dmitri Peskov, the Kremlin spokesman, said. "It is the government's obligation to defend the interests of our companies in foreign countries."

West Qurna, mapped by Soviet geologists in the 1980s but mostly untapped, is one of a dozen or so supergiant oil fields in the world.
They are known in the industry as "elephants," fields so large they can tip the fortunes of companies or countries.

Source / International Herald Tribune
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