Damaged oil pipeline at West Qurna-2 in Iraq restored, supplies from storage tanks underway
MOSCOW. Dec 9 (Interfax) - Oil deliveries from the West Qurna-2 project, from the field's storage tanks to the Tuba main storage facility from which oil is exported, have resumed, Reuters news agency reported, citing two sources.
Earlier on Monday, the agency, citing two representatives of Iraq's Basra Oil Company, reported that Iraq had completely halted production at the West Qurna-2 field, which amounted to around 460,000 barrels per day, due to a leak in the export pipeline. It was reported that the pipeline damaged by the leak transports oil from storage tanks to the Tuba main storage facility, which in turn supplies crude to export terminals.
Repair work on the damaged pipeline had been completed by Monday evening, the agency reported. Full restoration of the field's operations was expected between 1 AM and 2 AM.
The West Qurna-2 project is being developed under a service contract signed by Lukoil in January 2010. The Iraqi state-owned North Oil Company holds a 25% stake in the project. The contract term is 25 years. The first oil at the project was obtained in March 2014. This is one of the world's largest fields. Its initial recoverable reserves are around 14 billion barrels. Oil production at the project was supposed to increase to 800,000 bpd. Lukoil fully finances the costs of the entire project. After the completion of the historical cost recovery stage, the company began receiving full reimbursement of current costs in the form of a share in the produced oil. Lukoil also receives a fee amounting to its share (75%) of the $1.15 per barrel of oil produced due to the project participants, and pays profit tax.
After the introduction of UK and U.S. sanctions against Lukoil in October, the company declared force majeure on the West Qurna-2 contract. The sanctions forced the company to announce the sale of its foreign assets. A key detail in the process is that the Trump administration would prefer that Lukoil's global assets are taken over by a U.S. entity, which could limit the pool of potential buyers, people with knowledge of the matter told Bloomberg last month. Iraq's government is discussing seeking a six-month sanctions waiver from the U.S. Treasury Department for Russia's Lukoil to have more time to sell its stake in the West Qurna-2 oilfield, Reuters has said, quoting three Iraqi energy officials.
Iraq's Oil Ministry also planned to approach a number of leading U.S. producers to transfer the Russian company's stake in the field, Bloomberg reported. "Transferring the management of the West Qurna-2 field to one of the U.S. oil companies will serve mutual interests, strengthen the stability of global markets and ensure Iraq's oil production and market share," the agency quoted the ministry as saying. Bloomberg said the ministry did not disclose which firms would be invited or the expected timeline for a final agreement, but the agency said Exxon Mobil Corp and Chevron Corp. were among U.S. oil companies interested in at least some of Lukoil's international assets.
On Monday, the U.S. State Department told Bloomberg that it supports Lukoil's intention to transfer its stake in West Qurna-2 to a U.S. company.
