Russia Lukoil to Cut Iraq Oil Production By 30% After Govt Decision

MOSCOW - OAO Lukoil Holdings will cut its production in Iraq by 30% after the Iraqi government decided to limit output in order to prop up prices, the president of Lukoil Overseas Holding Ltd. said in an interview.

Andrey Kuzyaev told state television Rossiya-24 on Wednesday that Lukoil now estimates that output at the West Qurna-2 oil field will reach 1.2 million barrels per day instead of 1.8 million barrels predicted in an initial estimate. The revision could prolong the production period to 19 years from 12-13 years projected earlier.

Lukoil, Russia's second biggest oil producer, revised its plans after the Iraqi government decided to cut the country's production to 9 million barrels a day from 12 million barrels.

"Iraqis came to the conclusion that they don't need peak output, which will result in the creation of excessive infrastructure. And when oil production starts to decrease, that would create an unstable macroeconomic and microeconomic situation for Iraq," Mr. Kuzyaev said.

He said the company plans to invest at least $5 billion in its Qurna-2 project in 2013, and the first oil is expected to be produced in late 2013 or early 2014.

Mr. Kuzyaev also said that Lukoil decided not to buy a stake in the neighboring project West Qurna-1 from Exxon Mobil Corp.

In another overseas project in Uzbekistan, Lukoil has already invested $2 billion and plans to channel $5 billion more into natural gas production, Mr. Kuzyaev said.

"In the next seven years we [Lukoil's production] will grow four fold to reach levels of 18-19 billion cubic meters of gas in Uzbekistan," he said.

He also said that the company will run geologic exploration on a shelf in Western Africa in Sierra Leone, Ivory Coast and Ghana, where a total resource potential is seen at around 2 billion barrels of oil equivalent.

Copyright (c) 2012 Dow Jones & Company, Inc.


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