One of Iraq's largest oil fields - as well as one of the world's largest untapped fields - began commercial production on March 29. Russia's Lukoil operates the West Qurna-2 oil field, and will ramp up production from an initial 120,000 barrels of oil per day to 400,000 bpd by the end of 2014. West Qurna-2 is a massive oil field located near the southern city of Basra, holding an estimated 14 billion barrels of oil.
Lukoil, which owns a 75% stake in the field, raised its global production by 1.1% last year, and hopes to further boost production by 1.5% in 2014. West-Qurna-2 alone will allow Lukoil to double its overseas production. "The start of production at West Qurna-2 is strategically important for LUKOIL," said CEO Vagit Alekperov in a statement. The 120,000 bpd level is the minimum at which Lukoil can begin receiving payback from the Iraqi government. It has already invested $5 billion in the project, and has plans to invest a total of $42 billion over the next five years to grow production to 1.2 million bpd.
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West Qurna-2 is also strategically critical for Iraq, which aims to lift production levels to 4 million bpd this year. Iraq is already OPEC's second largest producer, behind only Saudi Arabia, and has ambitious plans to expand. The country, recovering after years of war and instability, hit a 35-year high in production in February, according to IEA figures. The simmering tension between Baghdad and Kurdistan has calmed in recent weeks, with the announcement by Kurdistan to begin pumping 100,000 bpd as a "gesture of goodwill." If the two sides can come to an accord, Iraq's potential is enormous. Oil analysts are beginning to eye the possibility of a supply glut as Iraqi oil ramps up along with other supplies from around the world.
By Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com More