West Qurna-2 budget deliberations continue

14 January 2016

The $4bn oil project’s budget for 2016 has yet to be approved by Baghdad

The developers of Iraq’s West Qurna-2 (WQ2) oil field have yet to reach a final agreement on the 2016 budget for the project with Baghdad, according to Lukoil, the Russian company that operates the field.

“The elaboration with the Iraqi authorities of the final version of the WQ2 2016 budget is in process,” a Lukoil spokesperson told MEED in an emailed statement. “Lukoil is in constant dialogue with the Iraqi side on this matter. We are making proposals and they are suggesting changes.”

The spokesperson went on to say Lukoil expects approval for the budget to be granted in the near future, without setting out a time frame.

Lukoil says uncertainty about the project’s budget has not affected production from the field, which stands at between 400,000 and 450,000 barrels a day (b/d).

The deliberations between Lukoil and the Iraqi authorities have been ongoing for more than two months.

There is increased uncertainty over the work schedule of projects in the south of Iraq amid a government budget crisis that has been sparked by persistently low oil prices.

A letter from Iraq’s Oil Ministry, which was sent on 6 September 2015, warned foreign companies developing the country’s southern oil fields that Baghdad had “sharply reduced the funds available to the ministry” due to the drop in government revenues from crude sales.

In November, UK oil company BP said it was waiting for Iraq’s central government to approve the budget for its $2.5bn Rumaila field development project.

The firm said contract awards worth $1.37bn were on hold as it waited for approval from Baghdad.

The Rumaila project is owned by a partnership between BP, China National Petroleum Corporation (CNPC), and Iraq’s state-owned South Oil Company (SOC).

WQ2 is being developed by Lukoil in partnership with SOC.

It is one of the largest oil fields in the world, with estimated recoverable oil reserves of 13 billion barrels. These will be produced from two major formations: Mishrif and Yamama.

The WQ2 field development project is being conducted in three phases:

  • Phase 1: Named Early Oil, this phase was commissioned in 2014 and aimed to boost capacity to a planned 400,000 b/d;
  • Phase 2: Also known as the Mishrif full-field development, this will increase production by 150,000 b/d to 550,000 b/d. Lukoil has hired Australia’s WorleyParsons as project management consultant for the expansion;
  • Phase 3: This will develop the deeper Yamama formation, adding another 650,000 b/d of production.

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