Lukoil Starts New Iraq Oilfield as Output Reaches 35-Year High

Mar 29, 2014 3:32 am ET

March 29 (Bloomberg) -- OAO Lukoil started producing crude from Iraq’s second-largest oilfield as the nation boosts output to levels last seen more than three decades ago.

The West Qurna-2 field in southern Iraq has been producing at a rate of 120,000 barrels a day since yesterday, operations manager Gennady Budarin said an interview in Basra, before the official inauguration ceremony today. Russia’s biggest publicly traded oil producer expects to bring the field’s output to 400,000 barrels a day by the end of the year, he said.

Lukoil plans to drill 459 wells and use water injection from 2017 to bring the field’s daily output to 1.2 million barrels, or about a third of the Iraq’s current production.

Iraq is now the second-biggest member of the Organization of Petroleum Exporting Countries behind Saudi Arabia, after adding 1 million barrels of output since 2007. Wars and sanctions crippled the country for decades, contributing to four of the 11 biggest global supply shocks in the past 60 years, according to the International Energy Agency in Paris.

“Iraq has been the key growth center within OPEC,” said Amrita Sen, the chief oil market strategist at Energy Aspects Ltd. in London.

The nation plans to increase output capacity to 4.7 million barrels a day next year, from about 3 million in 2013, Deputy Prime Minister for Energy Affairs Hussain al-Shahristani said Jan. 28. Exxon Mobil Corp., Royal Dutch Shell Plc and Total SA are among those helping to rebuild Iraq’s energy industry.

Rising Output

Iraq boosted production to a 35-year high of 3.6 million barrels a day in February, the IEA estimates. Export capacity in the south is rising with offshore facilities to load tankers in the Persian Gulf.

The government is still contending with a dispute over oil revenue in the northern Kurdish region, as well as attacks on a pipeline to Turkey.

West Qurna is 64 kilometers (40 miles) northwest of Basra. It is divided in two, with West Qurna-1 being developed by a group led by Exxon Mobil and West Qurna-2 operated by Lukoil. The latter, with reserves of 13 billion barrels, was discovered in 1973 and explored by Soviet geologists in the 1970s and 1980s. Rumaila in the south is Iraq’s biggest oilfield.