x Abu Dhabi, UAESaturday 22 July 2017

Iraq to prefer Russia and China bids for Exxon stake

Iraq will give preference to offers by Russia's Lukoil and China's CNPC if they decided to bid for ExxonMobil's stake in the West Qurna-1 oilfield.

Lukoil, the second-largest producer of crude oil in Russia, is developing West Qurna-2 field in Basra. Nabil Al Jourani / AP Photo
Lukoil, the second-largest producer of crude oil in Russia, is developing West Qurna-2 field in Basra. Nabil Al Jourani / AP Photo

Iraq would give preference to offers by Russia's Lukoil and China's CNPC if they decided to bid for ExxonMobil's stake in the West Qurna-1 oilfield, a senior oil ministry official was reported as saying on Friday.

Baghdad has received "positive signals" from both companies that they may make offers for the US$50 billion (Dh 183.64bn) project, Reuters said.

"During two separate meetings with executives from CNPC and Lukoil, Iraq informed the companies that it favours their contribution to purchase Exxon's share in West Qurna-1 oilfield," the agency quoted the unidentified official as saying.

Acquiring the stake would significantly boost the position of Russia or China in tapping Iraq's oil reserves.

Exxon is pulling out of the project to focus on exploring for oil in Iraq's autonomous Kurdish region in the north. Baghdad considers contracts awarded by the Kurdistan regional government as illegal and told Exxon it had to choose between deals in southern Iraq or in Kurdistan. Exxon chose the latter, calculating that activities there would be more profitable.

The American oil giant has set up a "virtual data room" for the West Qurna-1 field and has asked for offers to be submitted by December 5, sources said.

Lukoil, the second-largest producer of crude oil in Russia, is already developing West Qurna-2. The company said previously that West Qurna-1 was "too big for it to swallow".

However, Lukoil now appears to be reconsidering that stance, prompting industry experts to speculate it may be looking around for another company, possibly the state-owned CNPC, to partner it on the deal. A Lukoil spokesman confirmed the company had been approached to develop the West Qurna-1 field. "We are studying it."

Two CNPC sources said the company was keen to expand its activities in Iraq and would not go after projects in Kurdistan out of concern that it would destabilise its relations with the government in Baghdad.

lgutcher@thenational.ae