Lukoil has announced a force majeure at a significant oilfield in southern Iraq due to the disruption of its operations caused by Western sanctions, as reported by Reuters on Monday, referencing informed sources.
The West Qurna-2 oilfield, situated 65 kilometers (40 miles) northwest of Basra, is among the largest in the world and represents Lukoil’s most valuable foreign investment, producing approximately 480,000 barrels daily, which makes up about 9% of Iraq’s overall oil production.
As stated by Reuters, Iraq’s state oil authorities have halted all cash and crude oil payments to Lukoil in line with sanctions from the U.S. and the U.K. imposed last month. An Iraqi official relayed to the agency that payments owed to Lukoil will remain on hold until Baghdad identifies a means to navigate through non-sanctioned intermediaries.
Lukoil reportedly notified Iraq’s oil ministry last Tuesday that “force majeure conditions” hindered its ability to maintain regular operations at the West Qurna-2 field. An official from Iraq mentioned that the contract permits such a declaration, effectively shielding the company from penalties.
A high-ranking Iraqi industry official indicated that should the issue not be resolved within six months, Lukoil may entirely cease production and withdraw from the project, according to Reuters. The agency did not detail potential solutions to address the force majeure’s causes.
Moreover, it was reported that the sanctions led Iraq’s national oil company SOMO to cancel three crude shipments from Lukoil’s production share last week, with around 4 million barrels previously designated for Lukoil as payment in kind for November reportedly rescinded.
In a separate development, Lukoil was said to have ended all contracts with foreign personnel at the field last Friday, retaining only Russian and Iraqi workers on location.
Lukoil commenced production at West Qurna-2 in 2014, holding a 75% interest in the project, with initial plans to invest over $30 billion.
Lukoil, the largest private oil company in Russia, has yet to publicly respond to the force majeure declaration in Iraq.
