Key Iraq field to go to state, not Russia

MOSCOW, Aug. 9 (UPI) -- Iraq disappointed Russian oil officials hoping to revive the West Qurna-2 deal by saying the field will go to the state oil company.

At a news conference in Moscow where he is meeting with Russian officials, Oil Minister Hussain al-Shahristani said, "Assigning oil fields to the National Oil Company means that the company will have the right to choose foreign companies under contract terms."

Russian private giant Lukoil had a contract that was terminated in 2002 because Iraq accused it of not meeting the deal’s terms.

Shahristani had previously said all future Iraq deals will be in line with a yet to be approved federal oil law.

RIA Novosti reports Shahristani termed the Lukoil deal as "suspended," not "canceled."

It is a major prospective in Iraq's 115 billion-barrel reserve cache, with about as much expected to be found in addition after the country is fully explored.

He said the West Qurna-2 field's estimate has been raised from 4 billion to 16 billion barrels.

"The more we drill, the more we discover," he said.

While Iraq currently produces 2 million barrels per day, it is looking to enhance its capacity. This will come only after its Parliament deals with a draft oil law stuck in negotiations over the extent of federalism in deciding how to explore, develop and produce the oil, as well as the extent foreign and private companies will be allowed into the sector.

Officials from Lukoil, as well as state firms Zarubezhneft and Machinoimport, are to meet with Shahristani during his brief Moscow trip. Rosneft, the state-owned oil giant, may send a delegation as well.

Lukoil had a 68.5-percent stake in the West Qurna contract, which it shared with Iraqi, U.S. and Russian companies.

Shahristani said all qualified companies will bid on projects, though Lukoil has the experience to get a leg up.

"Lukoil is a large company with considerable experience of working in Iraq and substantial technical advantages, which of course increase its chances of winning the free, transparent tenders for Iraqi oil resources," Shahristani said.