The Middle East will account for more than two thirds of Lukoil's overseas investment this year, as the Russian oil company looks to increase production in Iraq.
Production at the West Qurna-2 field could commence by the end of the year and triple Lukoil's production outside Russia by 2015, said Andrei Kuzyaev, the head of the company's international upstream operations.
"This year we expect to invest about US$4.5 billion [Dh16.52bn] in our overseas projects," said Mr Kuzyaev. " I would say [the Middle East will account for] about 70 per cent, because our investment now focuses on the West Qurna project."
Russia's largest listed oil company expects to begin production at the supermajor field by the end of this year or early next. Output is projected to soar from 150,000 to 400,000 barrels per day (bpd) from first oil to the middle of next year.
By 2018, Lukoil expects to pump 1.2 million bpd at West Qurna.
"It is huge," said Mr Kuzyaev.
The Russian company increased its stake in West Qurna-2 to 75 per cent last year after Norway's Statoil exited the joint venture, with the remaining quarter held by the state-owned North Oil Company. There are plans to drill 40 wells this year and a further 90 in 2014.
The project is integral for the company's plan to pump up to 700,000 bpd outside Russia by 2015 and eventually raise international output from 10 to 20 per cent of total production by 2016.
Lukoil is looking abroad to counter limited opportunities for expansion inside Russia, at a time when output growth in the world's largest producer of oil is showing signs of decline. The Middle East features prominently in these ambitions. The region still holds vast reserves and is strategically located to serve the growing demand for energy in Asia.
"The Middle East and the Gulf is a key region for oil and gas companies in the world, and this our opportunity to expand," said Mr Kuzyaev.
Next year, Lukoil will invest about $2bn into the Arabian Gulf, according to Mr Kuzyaev. Apart from Iraq, the company is also active in Saudi Arabia, where it has a concession for a tight gasfield and is now deciding on the production technology for the unconventional gas.
"The amount invested into West Qurna will be different every year, according to the status of the project," said Mr Kuzyaev.
Unfavourable contract terms and tough conditions on the ground have prompted the oil majors ExxonMobil, Total and Chevron to strike production deals with the autonomous Kurdish region of Iraq, a move that has angered Baghdad, which regards those contracts as illegal and is fearful of Kurdish independence.
Under pressure from the central government, Exxon is reportedly looking to sell its stake in the West Qurna-1 supermajor field.
Lukoil has not joined its competitors in their move north and instead renegotiated the contractual terms for West Qurna-2.
The company has no plans to enter Kurdistan, said Mr Kuzyaev. It also decided not to bid for Exxon's West Qurna-1 concession, in spite of Baghdad's prodding.
"All companies have their own strategies and our strategy is concentrated on the projects in the south of Iraq."
The Russian company released strong full-year results this month, with profits last year rising by 6 per cent to $11bn. Earnings rose in spite of a production decline of 1 per cent, as output fell in Lukoil's fields in northern Russia.
