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BP and Lukoil seek to exit Iraqi oil projects due to unattractive investment environment

July 06/2021

MOSCOW (MRC) -- BP and Lukoil want to quit their Iraqi energy projects due to the current investment environment, the country's oil minister said, as OPEC's second biggest producer faces an exodus of international oil companies that want to exit unattractive contracts, reported S&P Global.

Lukoil wants to sell its stake in West Qurna 2 to Chinese companies, Ihsan Ismaael said in a video posted online.

"The investment environment in Iraq is not appropriate to maintain major investors," Ismaael said in the video addressing some members of parliament. "All major investors either are looking for another market or looking for another partner."

Officials from BP, Lukoil and the Iraqi oil ministry weren't immediately available for comment.

BP and Lukoil would join ExxonMobil, which is seeking to sell its stake in the southern oil field of West Qurna 1.

BP is lead contractor of the Rumaila oil field, where it has a 38% stake alongside CNPC's 37% holding and the rest is shared between state-owned Basrah Oil Co. and the State Oil Marketing Organization, its partners in a technical service contract that expires in 2034.

The southern field of Rumaila is the country's biggest with a production capacity of about 1.5 million b/d out of the country's 5 million b/d production capacity and estimated 17 billion barrels of recoverable oil remaining.

Lukoil has a 75% stake in the southern mega field West Qurna 2 with state-owned North Oil Co holding the remainder.

Iraq is considering buying Exxon's 32.7% stake in West Qurna 1, Ismaael said May 3, as the US major seeks to exit one of the world's largest oil fields with expected recoverable reserves of over 20 billion barrels.

Ismaael had previously said Iraq was in talks with potential unnamed US energy companies to take over Exxon's stake. Other partners in West Qurna 1 are PetroChina (32.7%), Japan's ITOCHU Corp. (19.6%), Indonesia's Pertamina (10%), and Iraq's Oil Exploration Co. (5%).

International oil companies in Iraq operate some of the country's biggest fields in return for a per barrel fee linked to production. The terms of the contracts have been a point of contention over the years, although Iraq needs international expertise to run these fields.

Exxon's exit from the southern West Qurna 1 field may be similar to Shell's 2018 divestment of its stake in Majnoon, where operations are now managed by Basrah Oil Co., the minister said May 3.

As MRC informed earlier, Russian energy major Lukoil (Moscow) is studying several potential petrochemical projects in Russia and Bulgaria, with investment decisions expected to be made on two of them in 2021.

Thus, Lukoil announced an investment decision in June, 2019, to proceed with a 500,000-metric tons/year polypropylene (PP) plant at its Kstovo refinery. In September this year it selected Lummus Technologyís Novolen PP technology and basic design engineering for the facilityís production unit. Kstovo is one of Lukoilís largest crude refineries in Russia with a throughput of 17 million metric tons/year, with the company recently adding a catalytic cracking unit that almost doubled the refineryís production of propylene feedstock to 300,000 metric tons/year.

At Budennovsk in Russiaís far south west, the companyís Stavrolen petchems complex currently has the capacity to produce 350,000 metric tons/year of ethylene, 300,000 metric tons of polyethylene (PE), 120,000 metric tons/year of PP, and 80,000 metric tons of benzene. Lukoil has for several years been considering construction of a new gas chemicals plant at Stavrolen to crack more ethane extracted from associated petroleum gas produced by its oil and gas fields in the north of the Caspian Sea. The potential new plant would raise Stavrolenís ethylene and PE output to around 600,000 metric tons/year each, and increase PP production to 200,000 metric tons/year.

Ethylene and propylene are the main feedstocks for the production of PE and PP, respectiverly.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 744,130 tonnes in the first four month of 2021, up by 4% year on year. Shipments of all PE grades increased. At the same time, PP deliveries to the Russian market were 523,900 tonnes in January-April 2021, up by 55% year on year. Supply of homopolymer PP and PP block copolymers increased, whereas shipments of PP random copolymers decreased.

Lukoil is one of the leading vertically integrated oil companies in Russia. The main activities of the company include exploration and production of oil and gas, production and sale of petroleum products. Lukoil is the second largest privately-owned oil company in the world in terms of proven hydrocarbon reserves. Lukoil's production capacities include polyethylene polypropylene. The structure of Lukoil includes one of the largest petrochemical plant in Russia - Stavrolen.

BP is one of the world's largest oil and gas companies, serving millions of customers every day in around 80 countries, and employing around 85,000 people. BPís business segments are Upstream (oil and gas exploration & production), and Downstream (refining & marketing). Through these activities, BP provides fuel for transportation; energy for heat and light; services for motorists; and petrochemicals products for plastics, textiles and food packaging. It has strong positions in many of the world's hydrocarbon basins and strong market positions in key economies.
Author:Margaret Volkova
Tags:PP, PE, crude and gaz condensate, petrochemistry, CNPC, Lukoyl, BP Plc, Exxon Mobil, Itochu, Pertamina, PetroChina, Shell, Stavrolen, Bulgaria, Iraq, Russia.
Category:General News
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