UPDATE 2-Iraq West Qurna 2 output seen at 500,000 bpd in 2014

Wed Apr 25, 2012 6:47am EDT

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(Adds LUKOIL comment, details, background)

By Aref Mohammed

WEST QURNA, Iraq, April 25 (Reuters) - Production at Iraq's West Qurna Phase-2 oilfield is expected to hit 500,000 barrels per day (bpd) in 2014, Iraq's oil minister said on Wednesday, as drilling of the first oil well began.

Iraq is expected to be the world's biggest source of new oil supplies over the next few years after signing contracts for big development projects with major oil companies. The supergiant oilfield in the south is managed by Russia's LUKOIL.

"This is the first oil well out of 23 wells to be drilled as (part of) the first phase of developing the West Qurna Two oilfield," Abdul-Kareem Luaibi told reporters while getting ready to climb a rig and press a button to start the drilling.

Iraq's oil production had been held back by decades of war and sanctions, but officials say they now expect it to rise quickly.

The head of state-run South Oil Co. said on Friday output from Iraq's southern oilfields was seen reaching 2.75 million bpd by the end of the year.

LUKOIL sealed a 20-year deal to develop the virgin West Qurna Phase-2 oilfield in an auction in December 2009, pledging to boost output to a plateau target of 1.8 million bpd in six years.

Its partner, Norway's Statoil, sold its minority stake in the field last month, making LUKOIL the sole foreign partner in one of Iraq's biggest new oil projects.

LUKOIL said in a statement that drilling operations at five well pads would occur simultaneously and that wells would be as deep as 5,000 metres. It said total investment in the field would be around $25 billion.

"Production from the oilfield will reach 150,000 barrels per day by the end of 2013 and increase steadily to 500,000 barrels in the second half of 2014," Sergei Nikiforov, a vice president for development and production at LUKOIL told reporters at West Qurna, 80 km (53 miles) north of the southern oil city of Basra.

West Qurna-2 is the world's second-largest undeveloped field with recoverable oil reserves of around 14 billion barrels, according to LUKOIL.

South Korea's Samsung Engineering signed a $1 billion oilfield service contract with Iraq for the field last month, part of an initial development plan to start production at the field. (Writing by Serena Chaudhry; Editing by Barry Malone and William Hardy)

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