LUKoil wins back licence from Iraq

Russian oil and gas companies have reached a series of oil deals with Iraq that would come into effect if at some stage United Nations sanctions are lifted. LUKoil, which last month lost a deal to develop Iraq’s West Qurna field that could be worth as much as $ 20 bn has announced that it had persuaded the Iraqi government to restore its licence.
The West Qurna field has an estimated 15 bn barrels of reserves and is expected to produce 700,000 bpd with $ 3.7 bn of investment. Meanwhile, Iraq’s oil ministry said it had awarded a new contract to Stroitransgaz to develop the fourth block of Iraq’s Western Desert, an unexplored area believed to hold large oil reserves.

It also initialled a preliminary contract with Soyuzneftegas to develop the southern Rafidain field, which Iraq says will yield 100,000 bpd after a $ 500 mm investment. The ministry also initialled a preliminary contract with Tatneft to develop another block in the Western Desert and said it launched negotiations with ZarubezhNefttowards a contract to develop the Bin Umar field, also called Nahr Umr, which holds an estimated 6 bn barrels.
France’s TotalFinaElf had a preliminary deal to develop Bin Umar and neighbouring Majnoon until last year, when Baghdad scrapped oil development deals with western companies. Baghdad cancelled the deal with LUKoil last month after the company was reported to be negotiating with the US and the Iraqi opposition.

Beside Russia, companies from China, India, Indonesia, Vietnam, Tunisia and Syria have contracts or preliminary contracts to develop Iraqi oil fields. None of the contracts is of any use unless the UN lifts sanctions that prohibit foreign investment in Iraq. And it is impossible to say whether a post-Saddam Iraqi government would honour the deals.
But analysts believe the new agreements are aimed at helping Saddam Hussein buy time by giving Russia an additional incentive to oppose any US move towards war. The oil deals come as the US appears to be stepping up its war rhetoric while Russia and others are arguing that UN weapons inspectors need more time.
“We simply hope that in the 21st century, people will understand they ought to resolve their differences by peaceful means,” said Valentina Smirnova, of Stroitransgaz. “We think there are reasons to be an optimist.”

Separately, Ukraine’s President Leonid Kuchma started a week-long tour of US allies in the Persian Gulf with a visit to Saudi Arabia.
The trip is to continue with visits to Kuwait, Bahrain and the United Arab Emirates. A spokesman said Kuchma wanted to boost mutual trade and investment but he would also be holding talks with top political leaders aimed at averting war in Iraq.