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Iraq: Lukoil Chief Says Prewar Deal Still Valid

by Matt MooreAssociated Press/Boston Globe
March 11th, 2004

BAGHDAD, Iraq -- The head of Russia's Lukoil said Thursday that a lucrative prewar deal to produce oil in Iraq is still valid, but conceded that its fate hinges on the decision of the new government due to take power on June 30.

Lukoil president Vagit Alekperov met this week with Iraq's oil minister, Ibrahim Bahr al-Ulloum, to discuss the 1997 contract to drill at West Qurna-2, one of Iraq's most promising oil fields.

Saddam Hussein canceled the $6 billion deal after Lukoil refused to violate U.N. sanctions on Iraq by drilling in the area, but Lukoil, Russia's second-largest oil producer, is looking to recover the deal.

Alekperov and Bahr al-Ulloum signed an agreement for Lukoil to train oil workers and reached "an understanding" on the West Qurna-2 contract, the Lukoil president told reporters, without providing details.

"The main problem is in the fact that the executive power, the government of Iraq is still being set up," Alekperov said "We hope that already in the summer, after the transfer of power to the interim government of Iraq, things will start moving quicker and in a more constructive way, especially those related to such large scale projects as development of oil fields."

The Bush administration plans to transfer power back to Iraqis on June 30, although it will maintain a military presence.

Alekperov didn't provide a timeframe for the company, which has invested millions of dollars in preplanning in the contract, to start drilling and producing in the field.

Alekperov, whose country strongly opposed the U.S.-led war to oust Saddam, said it would be up to the Iraqis, not coalition officials, to decide on the contract. The coalition also has said it would leave such decisions up to Iraqis after the handover.

"Our project concerns Iraq. Those are the assets of the Iraqi people," he said.

Lukoil had a 68.5 percent share in a consortium to produce at West Qurna-2. Its partners in the production-sharing agreement included Russian service companies Zarubezhneft and Mashinoimport, each with 3.25 percent, and the former Iraqi Oil Ministry, with 25 percent.

After the U.S.-led war ended, Lukoil threatened to sue to try to recover its contract.

According to Oil Ministry spokesman Assam Jihad, daily oil production in Iraq averages 2.2 million barrels a day, and they hope to reach 2.8 million barrels daily by the end of March. Before the war, production was at 2.8 million barrels daily.

Exports total 1.7 million barrels daily with a targeted goal of 2 million barrels "soon." He would not specify when. Before the U.S.-led war, exports averaged 2 million barrels daily.




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