Lukoil signed a $1 billion deal with South Korea’s Samsung Engineering on Thursday to develop Iraq’s second-biggest oil field, in which the Russian energy giant has a majority stake.
The agreement is part of efforts to increase to 1.8 million barrels per day (bpd) crude output at the West Qurna-2 field in the south of the country, which has known reserves of 12.876 billion barrels.
“The contract is worth $998 million,” said oil ministry spokesman Assem Jihad, after a signing ceremony attended by Oil Minister Abdelkarim al-Luaybi, Samsung Engineering president and chief executive Park Ki-Seok and Lukoil Mid-East Ltd’s Iskander Nasyrov.
Among requirements in the contract, Samsung must build five well pads with 67 development wells, infrastructure to extract and treat oil, and water intake equipment over the course of 29 months, according to Lukoil.
Lukoil has also signed a 27-month contract with Turkey’s ENKA Insaat to build a gas turbine power plant and a 22-month deal with a Franco-Jordanian consortium to expand storage capacity at the Tuba oil export terminal.
A consortium led by Lukoil won a contract in December 2009 to increase oil production at West Qurna-2.
Under the 20-year deal, extendable by five years, that was signed in early 2010, the companies receive fees of $1.15 per barrel extracted.
Lukoil currently holds a 56.25 percent stake in the group, while Norway’s Statoil holds 18.75 percent and Iraq’s state oil company the remaining 25 percent.
Earlier this month, however, Statoil said it is in the process of ceding its stake in the project to the Russian firm, a move that has been approved by authorities in Baghdad.
Iraq, which relies on oil exports for the lion’s share of government income, currently produces around three million bpd. It aims to ramp up its production capacity to 12 million bpd by 2017, but analysts say that figure is too ambitious.
The country holds the fourth-largest oil reserves in the world, according to the BP Statistical Energy Review.