Iraq would favor CNPC, Lukoil bids for Exxon oil stake

BAGHDAD Fri Nov 16, 2012 2:12pm EST

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BAGHDAD (Reuters) - Iraq would favor bids by Russia's Lukoil (LKOH.MM) and China's CNPC if they decided to buy Exxon Mobil's (XOM.N) stake in the super-giant West Qurna-1 oilfield, a senior oil ministry official said on Friday.

A sale of the stake to either company would significantly strengthen the position of Russia or China in exploiting Iraq's oil reserves, the world's fourth biggest.

"During two separate meetings with executives from CNPC and Lukoil, Iraq informed the companies that it favors their contribution to purchase Exxon's share in West Qurna-1 oilfield," the official told Reuters.

Baghdad said it had received "positive signals" from both companies that they will consider making an offer for the $50 billion project, which Exxon wants to pull out of to focus on its deal for exploration blocks in Iraq's autonomous Kurdish region.

Exxon riled Baghdad by signing deals last year with the Kurdistan regional government (KRG). Baghdad rejects contracts granted by the KRG as illegal and told Exxon it had to choose between working in southern Iraq or Kurdistan in the north.

The U.S. oil major opted to stick with Kurdistan, where the contracts are seen as more lucrative.

"We have received positive signals from both CNPC and Lukoil that they will consider purchasing Exxon's stake in West Qurna-1," said the official on condition of anonymity.

"Iraq believes that both companies have enough financial resources and the technology to manage the giant oilfield instead of Exxon Mobil," he added.

DATA ROOM OPENED

Exxon has now opened a virtual data room for West Qurna-1 and approached all likely buyers, inviting bids by December 5, two sources said.

Lukoil, Russia's second-largest crude producer which is already developing West Qurna-2, had previously said West Qurna-1 was "too big for it to swallow", but last week said it was looking into the option.

That has prompted some speculation it could team up with another company, possibly CNPC, to develop the field.

A spokesman for Lukoil confirmed the company had received an offer to develop West Qurna 1: "We are studying it," he said, declining to comment on whether a joint venture was on the cards.

Lukoil is trying to offset a production decline at its fields in Russia, where it faces competition from state-backed companies, by acquiring foreign upstream assets.

The company is active in the Middle East, Central Asia, West Africa and Latin America. But Russia's vast Arctic offshore reserves are off-limits for Lukoil due to legal restrictions that limit participation to state-controlled companies.

Two CNPC sources said the company was aware of Exxon's plan to pull out of the West Qurna 1 project, but declined to confirm or deny reports it was thinking of moving into the field.

In general, they said, CNPC is interested in expanding its operations in Iraq and will not entertain any projects in the Kurdish region so as not to jeopardize its existing deals with the federal government.

A spokesman of the state-owned China National Petroleum Corp. declined to comment on its plans.

Earlier this week, Iraq's deputy prime minister for energy, Hussein al-Shahristani, said the government was in advanced talks with potential buyers to take on West Qurna and that there were enough appropriate candidates.

(Additional reporting by Vladimir Soldatkin in Moscow, Charlie Zhu in Beijing, Peg Mackey in London; Writing by Isabel Coles; Editing by Anthony Barker)

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Comments (1)
From the true business perspective Chinese offer seems the best, as they have the higoest internal price for foreign oil. For US its neglect as shale oil is at play, for russia it is just narrowing the competition base as Russia has own 60+ years of output of oil reserves. For China it is worth 150 USD or should I say 950 RMB per barrel. US is angry as this situation undermines the power of US currency. I thing it is too early to say this. China will import about 10m bbl/day of oil till 2020 and ONLY Iran, Iraq, Venezuela Saudi Arabia with their vast reserves can guarantee this imports.

Nov 16, 2012 6:58pm EST  --  Report as abuse
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