West Qurna-2 - Iraq - LUKOIL Overseas

On December 12th, 2009, a consortium of LUKOIL and Norway's Statoil won a tender for the development of the West Qurna-2 field in Iraq. Its estimated recoverable oil reserves total approximately 13 billion barrels, which will be produced from two major formations – Mishrif and Yamama. West Qurna-2 is one of the largest oil fields in the world. 

West Qurna-2 is located in southern Iraq, 65 km Northwest of the major port city of Basra. The field was discovered in 1973 and explored (using 2D seismic acquisition and exploration drilling technologies) by Soviet geologists in 1970s and 80s. The size of the current Contract Area is over 300 square kilometers. 

Contractual terms 

On January 31st, 2010, the Development and Production Service Contract for the West Qurna (Phase 2) Contract Area was signed. The contract has been ratified by Iraq’s Council of Ministers. The West Qurna-2 contract is a hybrid of a service contract and a Production Sharing Agreement (PSA) that potentially enables LUKOIL to book part of the reserves and production volumes. 

The current stakeholders are the national Iraqi South Oil Company (on behalf of the state) and a consortium of contractors including LUKOIL (75%) and the national Iraqi North Oil Company (25%). Norway's Statoil had a 18.75% stake in the project until May 2012 (when it transferred its share to LUKOIL). 

In January 2013, an amendment to the contract was signed which, among other things, establishes a new target production plateau of 1.2 million barrels of oil per day, a plateau production period of 19.5 years and an extension of the contract period to 25, rather than 20, years. 

Phases of development 

The project envisages re-entry into existing wells, drilling several hundred new production, exploration, appraisal and injection wells, construction of water supply and reservoir pressure maintenance systems and building production and multiple infrastructure facilities. These include a shift camp, access roads, power supply facilities and infield and external pipelines. Construction of the main production facilities began in April 2012. 

The West Qurna-2 project is being conducted in three phases. Phase 1 – Early Oil Mishrif is based on the assumption that commercial production will start at 120 kbpd, which will be increased to 400 kbpd. Phase II – Mishrif Full Field Development involves the implementation of full-scale field development at Mishrif, which will increase production by another 150 kbpd (to 550 kbpd). Phase III – Yamama will involve the development of a deeper formation, adding another 650 kbpd. 

Early Oil 

The first field development phase – Early Oil – was launched in record time. The following facilities have been completed in the Contract Area since April 2012: a 400 kbpd capacity Central Processing Facility (CPF) (the field's main production site), 48 development wells (as of March, 2014), 5 well pads, a 126 MW capacity Gas Turbine Power Plant (GTPP), Euphrates water intake, an over 100 km long export pipeline to the Tuba Tank Farm, additional tanks at Tuba Tank Farm with total capacity of 198,000 m3, a field camp, access roads and additional flow lines.

On March 29th, 2014 LUKOIL has started commercial production at the oil field at the target level of 120 kbpd. The official ceremony was attended by Hussain al-Shahristani, Deputy Prime Minister of Iraq for energy, Arkady Dvorkovich, Deputy Prime Minister of the Russian Federation, Vagit Alekperov, President of LUKOIL, members of the Iraqi government, Basra province authorities and representatives of major contractors.

Engaging the local population 

LUKOIL is actively engaging the local population for work at West Qurna-2. Over 11 thousand workers were engaged during peak construction; two-thirds were locals employed by international and Iraqi contractors. 

The Company set up its training center in the North Rumaila area of Basra as part of its responsibility to the local community. Graduates of the center, which is capable of training up to 350 students simultaneously, have been hired for various specialized jobs at West Qurna-2. Under the guidance of experienced engineering and technical personnel, they will participate in the launch of production and further work on-site. 

LUKOIL makes a major effort to improve the lives of the local population. Special attention has been allotted to social projects, especially in athletics, education and medicine, from the very beginning of the project.