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9 Aug, 2007 21:34

Lukoil will compete on equal footing in Iraq

Russia's ambitions in the Middle East oil sector have been under discussion with Iraq's Oil Minister in Moscow. Iraq is drawing up a new oil and gas law, which will reassess all agreements made with foreign companies under Saddam Hussein.

In 1997, Russia's Lukoil signed an agreement to participate in developing Iraq's West Qurna-2 field, estimated to hold more than 15 BLN barrels worth of oil. But now Iraq is drawing up a new oil and gas law to come into effect next month, putting its national oil company in charge of deciding how to develop its major fields.

“Lukoil will participate in the tender alongside other countries according to the new law on oil and gas. Because Lukoil started developing the Qurna-2 project before, it may be able to follow the most attractive provision to us. In this case, it will be the winner. If another company’s provision is better – then Lukoil chances will decrease,” stressed Iraqi Oil Minister, Hussain Al-Shahristani.

But Lukoil told Business Today it believes it has a good chance of beating the competition for West Qurna-2, because of its experience in the country, the one with ambitions to become the world's largest oil producer after Saudi Arabia.

“With developments of new fields, it’s quite feasible that Iraq can reach a target of 6 MLN barrels a day in less than five years- that’s by 2012,” Hussain Al-Shahristani stated.

Analysts, however, say the 6 MLN target is feasible, but warn that achieving it in five years is totally unrealistic.

“No major company is going to commit any significant amount of money to Iraq until that country is stable, and that looks like it’s not going to happen within five years. So we're definitely looking at the next decade, we're looking more like 15- 20 years down the road for those kind of figures,” Chris Weafer, Chief Strategist from Alfa-Bank, comments.

As for Russia's interests, “it will ultimately fall down to the relationship between the White House and the Kremlin as to whether or not Lukoil or other Russian companies get access to those fields,” Mr Weafer believes.

Moscow has recently been making it more difficult for U.S. energy majors to gain access to Russia’s most valuable reserves, but the country may now find it has to compromise at home, to get what it wants abroad.