Russia, along with Norway, have signed a contract with the Iraqi government to develop one of the world's biggest undeveloped oil fields laying the groundwork to turn the conflict-shattered country into one of the planet's top oil exporters. Russian oil giant Lukoil and Norway's Statoil ASA are set to develop the West Qurna Phase 2 oil field in southern Iraq, which is expected to produce 1.8 million barrels per day (bpd). The field is rumoured to have reserves of 12.88 billion barrels of oil.
The consortium of Lukoil and Statoil ASA gives the Russian company a 85 percent majority of the venture, but both companies are being paid a remuneration fee of US$1.15 per barrel, according to the deal.
Iraq: Soon a major oil power
As Iraq begins to emerge from the conflict that has torn the country apart since 2003, the government is pursuing lucrative contacts to encourage foreign investment in the country. With the likes of Lukoil and Statoil putting literally billions into the country, Iraq could soon place in the top three oil producers in the world.
Industry experts have predicted that the country could easily match Saudi Arabia with a daily output capacity of 12 million bpd, much more than its current 2.5 million.
Apparently the contracts have a sub-clause in them obliging the companies to hit a certain output or face fines worth billions of dollars. With Iraq's current infrastructure consisting of rusty pipelines, poor storage and outdated equipment, massive investment will be needed to make Iraq the oil power it could become.
However, there is another problem on top of this; the contracts face a potentially troublesome hurdle in a March election as there is no guarantee they will be accepted without modifications by the next government. Some lawmakers have stated that the deals are illegal and that the poor infrastructure of the country will make any progress near to impossible.