Posted on 02/10/2003 6:46:46 PM PST by knak
BAGHDAD, Iraq -- Baghdad on Monday again pulled the plug on LUKoil's $3.7 billion project to develop the massive West Qurna oil field, saying this time it is final, but also held out hope of signing a trade agreement with Moscow worth up to $40 billion over the next 10 years.
"The LUKoil contract is finished, and the contract has been scrapped, and there is no room for discussing it again," acting Iraqi Oil Minister Samir Abdulaziz al-Najem told reporters in Baghdad. "The company has failed to fulfill its commitments."
LUKoil had held the contract initially until mid-December last year, when Baghdad reneged, saying the No. 1 Russian oil major had broken the terms of the deal by not beginning development work.
Monday's announcement seemed not to effect LUKoil's determination to pursue the West Qurna oil field, which holds 7.8 billion barrels (1.11 billion tons).
"Our contract is still valid," LUKoil president Vagit Alekperov said Monday, Interfax reported.
Dmitry Dolgov, a LUKoil spokesman, said Iraq has not formally informed the company of any changes. "And if there are any, it would be a subject for the arbitration court in Geneva to decide on," he said.
Iraq's decision in December to break off the West Qurna project with LUKoil coincided with Russia voicing a tougher stand regarding Baghdad's disarmament.
It was unclear whether Monday's announcement was related to President Vladimir Putin's visit to Germany and France, where he was expected to discuss United Nations arms inspections and the escalating conflict between the United States and Iraq.
The government did not comment officially on the West Qurna decision. But a government source, who declined to be identified, said Russia was unlikely to give up on the oil field.
"Russia still sees the project with LUKoil's participation as a priority," the source said, Interfax reported. "Breaking it would have a very negative effect on trade and economic ties between Russia and Iraq."
The source also said LUKoil's work on the project has been slowed down by the UN sanctions against Iraq and that replacing the oil major with another company would be unfair.
However, al-Najem said that giving the West Qurna deal to another company is possible. "Concerning other companies, the door is still open," he said.
Iraq has signed a number of contracts with Russian oil companies.
In January, Baghdad awarded a contract to state-owned Stroitransgaz to develop a field in western Iraq.
Iraq also signed a deal with state-owned Soyuzneftegaz to extract 200,000 barrels per day from the Rafidain field in the south of the country and with Tatneft to develop a field in the west.
Iraq has begun negotiations with Zarubezhneft, a state-owned holding company for foreign projects, on the giant Bin Umar oil field. Al-Najem said the field is estimated to hold 450,000 bpd of recoverable crude.
He also said Iraq had reached the final stage with another Russian company on developing the al-Kharraf oil field in southern Iraq, which has reserves of 100,000 bpd.
Russia and Iraq are discussing a total of 67 projects, 17 of them in the oil sector, al-Najem said.
Iraqi Trade Minister Mohammad Mehdi Saleh said Monday that Baghdad hopes to sign a 10-year, $40 billion deal with Russia on cooperation in the oil sector, Prime-Tass reported.
Al-Najem said Iraq bought from Russia a total of $1.2 billion worth of oil equipment under the UN oil-for-food deal.
"There are still large prospects for Russian firms to invest in our gas fields and sell oil equipment under the oil deal," he said.
(Reuters, MT)
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