Iraq's oil ministry has decided to break a $3.8 billion oilfield development contract signed back in 1997 with a consortium of three Russian oil firms—Lukoil, Zarubezhneft and Mashinoimport—and Iran's SCOP. The deal provided for the second stage of developing Western Qurna oilfield in southern Iraq, one of the world's biggest, with reserves of 7.3 billion barrels of oil.
The contract was canceled “because they [the consortium] have not fulfilled their obligations under the contract,” Iraq's ambassador to Moscow Abbas Khalaf told AP. Lukoil spokesperson Alexander Vasilenko said the consortium had not violated the deal and called the move “petty blackmail,” reported Russia's Interfax news agency.
According to the terms of the deal, the Western Qurna-2 development will begin immediately after the United Nations lifts sanctions against Iraq and the that companies will make preparations that do not violate sanctions, such as engineering and geological surveys and cost estimates. The Russian consortium has so far taken no steps towards fulfilling the deal although the Iraqi government had repeatedly warned that Lukoil stands to lose its contractual right if it does not move ahead with developing West Qurna.
The contract constituted a major incentive for UN Security Council member Russia to support Iraq. Its abrogation eliminates “one of the major reasons for Russia to support Iraq in the current international situation”, an official Russian source told Interfax. Russia is Iraq’s largest single foreign creditor, with eight billion dollars in debts accumulated prior to 1991.
A longstanding ally of Iraq and a strategic trading partner, Russia has forcedly proclaimed its opposition to a military campaign against Iraq and its support for lifting the UN sanctions, imposed by the Security Council after Iraq's invasion of Kuwait. Nonetheless, the Russians supported the latest November resolution, which demanded Iraq comply with UN inspectors searching for weapons of mass destruction.
LUKOIL was to have 52 percent of the production-sharing contract, SCOP kept 25 percent and Zarubezhneft, known in the West as Nestro, and Mashinoimport have 11.25 percent each under the scrapped contract. Output during the contract's 23-year term was expected to total 600,000 barrels of oil per day (bopd). — (menareport.com)
© 2002 Mena Report (www.menareport.com)
