Under the new contract, which will come into force once UN sanctions have been lifted, Stroytransgaz will develop block 4 in the Western Desert, where many of the deeper oil-bearing formations have yet to be explored. The company also initialled a contract for development of the Rafidain field in the south of the country, which has previously attracted the interest of other Russian, Chinese and UK oil companies. Tatneft has similarly initialled a contract for block 9 in the Western Desert (Oil & Gas, MEED Special Report, 23:3:01).

Baghdad said it cancelled Lukoil’s 68.5 per cent stake in a production sharing agreement for the West Qurna oil field because the Russian firm had failed to start development work, although this is forbidden under the sanctions.

However, the Iraqi government also had political motives for shunning the Russian firm after Moscow, usually one of Baghdad’s staunchest allies in the UN Security Council, voted in favour of the latest UN resolution on Iraq. Lukoil representatives are also understood to have provoked anger in Baghdad by holding discussions with Iraqi opposition leaders.

Lukoil has had a major stake in the West Qurna field since 1997. Lukoil’s compatriots Zarubezhneftand Machinoimportare the other members of the consortium, which is committed to making a minimum investment of $6,000 million by 2020 in the field. West Qurna has potential capacity of 1 million barrels a day (b/d).