Giulia Romano Topics Covered
Recently, Lukoil, one of the major Russian private oil companies, announced the declaration of major force for its West Qurna-2 oil field, located in southern Iraq. This situation arose following the impact of the Western sanctions which have hampered the company's operations. Details of this crisis were reported by Reuters, which cited sources familiar with the situation.
West Qurna-2 Oil Field
The West Qurna-2 field is one of the largest in the world and represents a crucial asset for Lukoil outside of Russia. Located approximately 65 kilometers northwest of the port of Basra, this field produces approximately 480.000 barrels per day, contributing approximately 9% of Iraq's total oil production. The loss of this production could have significant repercussions not only for Lukoil, but also for the Iraqi economy.
The consequences of sanctions
According to information revealed by Reuters, Iraqi oil authorities have decided to freeze all cash and oil payments to Lukoil, in compliance with sanctions imposed by the United States and the United Kingdom last month. An Iraqi official confirmed that payments due to Lukoil will remain blocked until Baghdad finds a way to process them through intermediaries not subject to sanctions.
Risks and possibilities of production interruption
Last Tuesday, Lukoil informed the Iraqi Oil Ministry that the conditions of force majeure They prevented the continuation of normal operations at the West Qurna-2 field. This type of declaration is required by the contract and offers the company legal protection from potential penalties. However, a senior Iraqi official warned that if the situation is not resolved within six months, Lukoil may decide to completely halt production and withdraw from the project.
Measures taken by Lukoil
Adding to these difficulties, sanctions forced the Iraqi oil company SOMO to cancel three crude oil shipments from Lukoil's production allocation last week. Approximately 4 million barrels of oil, previously earmarked for Lukoil as payment in kind for the month of November, were canceled. Furthermore, the company terminated all contracts with foreign personnel working in the field, retaining only Russian and Iraqi employees.
Lukoil's future in Iraq
Lukoil started production at West Qurna-2 in 2014, holding a 75% stake in the project, with initial investment plans exceeding $30 billion. Despite its strategic and financial importance, the company has not yet released an official comment regarding the force majeure declaration in Iraq. The situation therefore remains tense and the future outlook is uncertain.
Lukoil's declaration of force majeure is a clear indication of the challenges energy companies face in a context of growing geopolitical instability. Lukoil's ability to adapt to these new realities will determine not only the fate of its investment in Iraq but will also have broader repercussions on the regional energy landscape.