Russia's Lukoil OAO (LKOH.RS) and Norway's Statoil ASA (STO) Sunday signed a final deal for Iraq's supergiant West Qurna Phase 2 oil field, Iraqi Oil Ministry officials said.
The deal is the last in a series of agreements that Iraq has finalized with international oil companies in a bid to transform its dilapidated oil sector and eventually boost output to up to 12 million barrels a day from the 2.4 million barrels a day it currently produces.
The Lukoil-led consortium won the right to develop the field, which holds crude oil reserves of nearly 13 billion barrels, during the country's historic second licensing auction held in Baghdad in December.
The two companies pledged to lift crude oil production to 1.8 million barrels a day for a fee of $1.15 a barrel. Lukoil will hold the largest stake in the consortium at 75%, while Statoil will hold the remaining 25%.
Lukoil President Vagit Alekperov said last month his company would invest $4.5 billion in the West Qurna Phase 2 project over the next three to five years, adding that the company had already invested $300 million in start-up work and the search for contractors.
He said he believed the project would be profitable and would have a rate of return of 15%. He added that the 20-year deal could be extended for another five years.
Statoil has said it would invest $1.4 billion over the next four to five years.
Supergiant West Qurna Phase 2, discovered in 1973, is located in the Basra governorate, some 65 kilometers northwest of the city of Basra in southern Iraq.
Lukoil, Russia's second-largest oil company in terms of output, signed a contract to develop the field with the regime of Iraqi leader Saddam Hussein but the deal was annulled in 2002--a year before the U.S.-led invasion of Iraq.
The completion of the West Qurna Phase 2 deal brings to 10 the number of oil field contracts by Iraq with international companies following two successful post-war licensing auctions. If the contracts were implemented, they would quadruple Iraq's crude oil production capacity to a level matching or even exceeding that of the world's largest oil exporter, Saudi Arabia.