Lukoil has declared force majeure at Iraq’s giant West Qurna-2 oil field after Western sanctions against the Russian oil giant made its operations more difficult, Reuters reported, citing four sources with knowledge of the situation.
“Lukoil did not respond to a request for comment.
Last month, the US and Britain imposed sanctions on Rosneft and Lukoil, Russia’s two largest oil companies.
Iraq has since suspended all cash and crude payments to the company, the three sources said.
Last Tuesday, Lukoil sent a letter to Iraq’s oil ministry stating force majeure circumstances preventing it from continuing normal operations at the West Qurna-2 field, four sources said.
If the reasons for the force majeure are not resolved within six months, Lukoil will stop production and completely withdraw from the project, a senior Iraqi oil industry official said.
Reuters reported last week that Iraqi state oil company SOMO cancelled the loading of three crude oil shipments from Lukoil because of sanctions.
Lukoil’s payments from its Iraqi operations remain frozen under U.S. sanctions until a contractual adjustment is reached that provides a mechanism for developing an oil field and a way to make payments to unauthorised entities, an oil ministry spokesman said, adding that Iraq cannot deal with companies under U.S. sanctions.
Lukoil’s force majeure application has been approved under the terms of the contract and the company is seeking legal protection against penalties for failing to fulfil contractual obligations to the oil ministry, another Iraqi official said.
“West Qurna-2, one of the world’s largest oil fields, is Lukoil’s most valuable foreign asset. It is located 65 kilometres northwest of the southern port of Basra. The field accounts for about 9 per cent of Iraq’s total oil production. It currently produces about 480,000 barrels a day, officials said.