Iraq asked LUKOIL to cut investments in oil production

The government of Iraq has sent the country working in oil companies a letter asking them to cut expenses on the development of the Iraqi oil fields for the second year in a row, reported Friday by Reuters, which got acquainted with the text of the letter. According to the Agency, this letter was received by the Russian LUKOIL, working in the West Qurna-2, as well as companies Royal Dutch Shell, Exxon Mobil, Eni and Petronas.

According to the letter, Iraq believes that LUKOIL will cut spending on the project West Qurna 2, to $1.26 billion, the Russian company in 2015 offered to spend on the project is $2.1 billion, writes Reuters.

Baghdad and the oil companies have not yet reached agreement about the level of expenditure on the projects, said an unnamed senior official in the Iraqi government. According to him, it may cause delays in the implementation of all key Baghdad oil projects.

According to the interlocutor of the Agency, LUKOIL, BP and Shell have opposed spending cuts. The oil company, which sent a letter, either declined to comment or did not have the operational answer, writes Reuters.

International companies to help Iraq develop a major oil field. Under the terms of the service contract, the Iraqi authorities reimburse companies ‘ investments in oil. As noted by Reuters, the scheme worked smoothly, when a barrel of oil cost more than $100, but after the fall in world prices of oil to $40 Iraq more difficult to find sufficient quantities of oil to pay off debts to foreign investors.

In September 2015, Iraq has asked foreign oil companies to reduce investments in the production, warning that the government due to the fall in oil prices is not enough money to refund their investment. In February, the oil Minister of Iraq Adel Abdel Mahdi, said that following the talks most foreign oil companies have agreed to reduce their investments in the country in 2016 from $23 billion to just over $9 billion.

West Qurna-2 is one of the world’s largest oil fields. Its geological reserves are estimated at 35 billion barrels. LUKOIL jointly with Zarubezhneft and state-owned enterprise “foreign economic Association “Mashinoimport” has signed a contract with the Iraqi oil Ministry on the development and extraction of deposits in 1997. Due to international sanctions partners are unable to start developing this project. But after the lifting of sanctions, LUKOIL has returned to Iraq. Production at West Qurna-2, beginning in 2014. Now LUKOIL owns in the project 75%.