Iraq has approved a development plan for the Eridu oilfield submitted by Russia’s Lukoil in November 2021, opening the door for the Russian privately held oil producer to proceed to the development phase.
Lukoil said in a statement that Iraqi state-owned company Thi-Qar Oil approved a declaration of commerciality of reserves and the outline development proposal for the Eridu oilfield.
The deposit is located within Block 10, which was assigned to Lukoil and an affiliate of Japan’s Inpex under a service contract for exploration and production signed after the country’s fourth licensing round in 2012.
Lukoil is an operator with a 60% stake, with Inpex holding the remaining 40% interest.
Block 10 occupies about 5800 square kilometres in the southern part of Iraq, 120 kilometres west of the city of Basra and 150 kilometres from the West Qurna 2 field, where Lukoil holds a 75% stake in the operating consortium.
The development plan for Eridu targets a plateau production of 250,000 barrels per day of oil, Lukoil said.
The operator has drilled nine wells since the initial discovery at the asset was reported in 2017, with in-place oil estimated to be as high as 12.9 billion barrels, according to Lukoil.
Earlier reports suggested that the operating consortium will receive a profit oil return of $5.99 per barrel renumeration fee for oil to be produced at Eridu, against $1.15 per barrel for West Qurna 2, beyond sums to be received for recouping exploration and development costs.
According to Lukoil’s annual reports, its investments into gathering seismic data and drilling of wells on Block 10 ran to a total of $220 million in the period between 2016 and 2021.
Lukoil’s spending dipped to just $10 million in 2021 as Iraq slowed preparations for the Eridu development after the country had to reduce its oil production in line with commitments to the Opec+ grouping.
According to the US Energy Information Administration, Iraq’s total oil production fell by 900,000 bpd to 3.7 million barrels per day between January and July 2020 in compliance with its Opec+ production quota and also due to Covid-19-related operational challenges.
In January of this year, Iraqi oil production was averaging 4.33 million bpd in January, according to state-owned marketing monopoly Somo, about 10,000 bpd below the country’s current Opec+ quota.
Although Lukoil has been spared the brunt of European sanctions imposed after the Russian invasion in Ukraine in February 2022, the company was recently moved to sell its major downstream asset, the Isab refinery in Sicily, Italy, to a group of investors led by Cypriot private equity firm GOI Energy and backed by global commodity trader Trafigura.
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