Lukoil ‘ready to be paid at West Qurna-2’

Lukoil Overseas has said it is ready to begin recovering costs and getting paid for production at its West Qurna-2 project in Iraq.

The Russian operator informed the Iraqi Ministry of Oil that it has “fulfilled its contractual obligations for first commercial production” at the major project on Wednesday.

Lukoil said it had “successfully maintained an average daily production of at least 120,000 barrels for 90 days”, meaning it has passed the threshold to begin recovering costs and receiving remuneration.

Daily production is currently at 200,000 bpd, it added.

“The West-Qurna-2 project is developing at a fast pace, and production is going up,” said Andrey Kuzyaev, president of Lukoil Overseas.

“Timely cost recovery for the early oil phase will enable (Lukoil) to proceed to active implementation of the subsequent phases of the field development.”

Lukoil brought the field on stream at 120,000 bpd in late March after a series of delays. The Russian operator is looking to hit 400,000 bpd by the end of this year and has already set its sights on a start of exports by around the start of August.

In August, Lukoil plans to complete work on the central processing facility for the field, which will include nine trains, each capable of handling as much as 50,000 bpd.

That ramp-up will eventually include a natural gas processing plant, and Lukoil’s goal is to boost production to a maximum of 550,000 bpd from its Mishrif ­activities.

Earlier this month Lukoil penned a new agreement to allow investors to get a faster return on costs for the construction project at West Qurna-2.

The agreement has been changed to include the construction of the Tuba-Fao pipeline and will allow for change in the procedure for project investors to recover costs.

The Tuba-Fao project will see the construction of two pipelines between the Tuba tank farm and the Fao tank farm, the main export hub in Iraq on the Persian Gulf coast.

Pre-front end engineering design studies have already been carried out for the Tuba-Fao project which detailed a direct connection of the pipeline to single-point mooring facilities and an upgrade of the pumping systems.

West Qurna 2 is expected to provide a backbone of production for Iraq’s aspirations to boost its oil exports to 3.4 million bpd this year. Lukoil holds 75% of the field and operatorship, while Iraq’s state-controlled North Oil Company holds the remaining 25%.

Ultimately, Lukoil believes it can produce 1.2 million bpd from West Qurna with its next project after Mishrif — known as Yamama — expected to add another 650,000 bpd.Lukoil will complete front end engineering and design for Yamama in the middle of next year and hopes to begin construction by the end of 2015.

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