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Russia's LUKoil Urges Iraq To Approve Oil Deal

Vagit Alekperov

Vagit Alekperov

MOSCOW (Reuters) -- Russian oil firm LUKoil has urged Iraq's oil minister to remove obstacles to its investment in the West Qurna deposit, a month after China became the first country to renegotiate a Saddam Hussein-era oil deal.

LUKoil Chief Executive Vagit Alekperov told Reuters that Iraqi Oil Minister Husayn al-Shahristani was solely responsible for delaying the West Qurna deal, despite Russia's willingness to write off most of the Middle Eastern country's debt.

"We have offered our expertise and, if there are political aspects, to remove them. Unfortunately the [Iraqi] Energy Ministry has taken no steps," said Alekperov, who owns about 20 percent of LUKoil, Russia's second-largest oil producer.

"This is despite the fact Russia is probably the country that has written off the biggest Iraqi debt in order to ease the country's fate," he said.

Russia agreed in February to write off most of Iraq's remaining $12.9 billion debt and signed a separate deal to open up the country to $4 billion in investment from Russian firms. Moscow had already forgiven Iraq the bulk of its debt.

Iraq's cabinet last month approved a $3 billion oil-service contract with the Chinese National Petroleum Company, originally signed in 1997, in a move that could shape future deals in a country boasting the world's third-largest proven oil reserves.

'Totally Unfair'

LUKoil is fighting to revive its West Qurna deal, which was signed while Saddam Hussein was in power in Iraq. JPMorgan analysts have valued the Russian company's stake in the project at as much as $6.8 billion.

Al-Shahristani, the Iraqi oil minister, has said the original contract was "totally unfair" and, announcing the Chinese deal in September, said Iraq had refused anything but a service contract and would not share its oil.

"There exists the position of the minister, of one person," Alekperov said. "I hope we will find a compromise decision."

LUKoil, owned 20 percent by U.S. oil major ConocoPhillips, is also exploring new projects in Venezuela, Alekperov said.

In addition to its individual projects in the South American country, LUKoil is part of a five-company Russian consortium to develop projects in the Orinoco River valley, he said.

"These deposits are located close to the market. It's an absolutely new market that Russian companies can open up for themselves," he said.

LUKoil is participating in the consortium with Rosneft, Gazprom, TNK-BP, and Surgutneftegas.