Sources say that Chevron wants better terms with Iraq before acquiring the Lukoil Oilfield.

Sources say that Chevron is seeking better terms for the West Qurna 2 Oilfield.

Iraq nationalized oilfield operatorship after U.S. sanctions against Lukoil

Iraq has improved the terms of oil contracts with majors over the past two years

Dmitry Zhdannikov & Aref Mohammed

Three sources with knowledge of the matter said that Chevron, the U.S. oil major, is pressing Iraq to increase returns on the West Qurna 2 field in order to buy the project from Russia’s Lukoil.

Iraq nationalised its oilfield earlier this month after the U.S. imposed restrictions on Lukoil in order to pressure Russia to stop the war in Ukraine.

Lukoil was unable to run its international operations, including West Qurna. This is one of the largest oilfields in the world, and accounts for 0.5% of global supply of oil, as well as nearly 10% of Iraqi output.

Iraq's Oil Minister said that Chevron was in talks with Iraqi officials about the field.

Lukoil must sell its assets by February 28, 2019 to comply with U.S. sanctions.

CHEVRON AND OIL MINISTRY IN TERMS TALKS

Three sources claim that Chevron is in negotiations with the Iraqi Oil Ministry to improve the contract terms. Two out of three sources said that the Iraqi cabinet would have to approve any new contract terms.

Chevron's spokesperson stated that the company doesn't comment on commercial issues. The representative stated that Chevron continues to evaluate potential opportunities and has a global exploration and production portfolio.

"In all of its activities, Chevron adheres to a code that promotes business ethics. We also comply with the laws and regulations applicable in our industry."

Iraq's Oil Ministry said on Tuesday that the talks with Chevron continued. The ministry said that "the?negotiations continue, and many details remain under discussion."

Lukoil has not responded to a comment request.

IRAQ: FURTHER PUSH

The deal between Chevron and West Qurna 2 will be a new step in Iraq for the U.S. Oil Major. It has already agreed to develop several oil fields in Iraq as part of its international expansion after completing the deal to purchase U.S. Oil Producer Hess in 2025 for $53 billion.

Iraq, the seventh largest oil producer in the world, has signed oil contracts with major oil companies in the last two years that have improved terms. Iraq is looking to increase production and attract more investment.

TotalEnergies, BP and other top oil companies have signed agreements with combined investment?pledges exceeding $50 billion. This is a reversal from the exodus that had occurred due to poor returns on previous contract terms.

Baghdad has switched from service contracts and profit-sharing agreements to bringing back the oil majors.

The earlier service contracts covered the West Qurna 2 Lukoil project. According to industry sources, the deal was among 'the first projects signed with oil companies by Iraq after the U.S. invaded in 2003 and pays one of the smallest returns out of all Iraqi contracts.

Iraq's production has increased from 2.5 million barrels per days in 2003 to over 4 million barrels a day by 2025. Invasion in 2003.

Iraq has not reached the ambitious targets it promised to raise capacity to 9-12 millions bpd after the war.

Two officials from the company said that the state-run Basra Oil Company had taken over the field operations for a period of 12 months, while they waited for the ownership issue be resolved. (Reporting and writing by Aref Mohammad and Dmitry Zhdannikov, Additional reporting by Ahmed Rasheed, Stephanie Kelly and Alex Lawler. Editing and writing by Simon Webb and Jan Harvey.

(source: Reuters)