Exxon in talks to buy Lukoil stake in West Qurna-2 oilfield

Exxon Mobil has approached the Iraqi oil ministry to express its interest in buying Russian firm Lukoil’s majority stake in the giant West Qurna-2 oilfield, five Iraqi official sources with direct knowledge of the matter have told Reuters.

Lukoil is trying to sell its international assets after the US imposed sanctions on the company.

Exxon’s move would mark a major expansion of its return to Iraq as Moscow tries to offload key energy assets.

Exxon declined to comment while Lukoil did not respond to Reuters’ request for comment.

The US treasury cleared potential buyers to talk to Lukoil until December 13, but they will need approval for specific deals. Reuters reported last month that Exxon had joined Chevron in considering options to buy parts of Lukoil’s portfolio.

Giant oilfield produces 9% of Iraq’s total

Lukoil’s biggest foreign asset is a 75 percent operational stake in Iraq’s West Qurna-2 oilfield, one of the world’s largest with output of around 470,000 barrels per day. The field accounts for about 0.5 percent of world oil supply and 9 percent of total output in Iraq, Opec’s second-largest producer after Saudi Arabia.

Lukoil has declared force majeure at the field after Iraq halted cash and crude payments to the company.

Exxon had long been the operator of the neighbouring West Qurna-1 project before exiting last year when that part of the field produced around 550,000 bpd.

In the run-up to Exxon’s exit, the then head of the state-run Basra Oil Company said Exxon had valued its 32.7 percent stake in West Qurna-1 at $350 million. The two parts of the West Qurna field are located in Iraq’s south, near the city of Basra.

In October, Exxon signed a non-binding agreement with Iraq to help it develop its giant Majnoon oilfield and expand oil exports, marking the US major’s return to the country.

Exxon’s move to return to Iraq followed a string of deals with other oil companies, including Chevron, BP and TotalEnergies, as Iraq seeks to accelerate oil and gas production by offering more generous terms.

Iraq favours Exxon for takeover, source says

“Exxon is our preferred option to take over from Lukoil. The company has the capacity and experience needed to manage a field as large and complex as West Qurna-2,” said a senior Iraqi oil official who oversees foreign companies operations in the south.

A senior oil ministry official echoed the statement.

Iraq’s oil ministry said on Monday it had invited several US oil companies to enter negotiations about taking over West Qurna-2.

The ministry said it aimed to transfer the operation of the field to one of the firms through a competitive bidding process.

Further reading:

• Iraq seeks US buyer for Lukoil’s West Qurna-2 stake
• Iraq’s fiscal deficit to widen as oil revenue falls
• Iraq makes huge oil discovery but faces Opec restrictions