LUKOIL will produce the first oil at a field in Iraq in 2013, the company’s CEO Vagit Alekperov said.

“We are developing a project in Iraq. Security systems, including Iraqi ones, are working actively, and the [oilmen’s] camp is fully protected,” Alekperov said at a meeting with Prime Minister Vladimir Putin on Saturday, April 23.

“I think we will get the first oil in 2013,” he said.

It was planned earlier that LUKOIL would produce the first oil at the West Qurna-2 field in late 2012. The company will invest 4.5 billion U.S. dollars in the project at the initial stage, while its overall investments will exceed 30 billion U.S. dollars

“The investments LUKOIL plans to make together with its partner Statoil in the first stage will amount to 4.5 billion U.S. dollars. Overall investments will exceed 30 billion U.S. dollars,” Alekperov said earlier.

“Production will amount to 95 million tonnes of oil a year, a stable production level for more than ten years,” he said.

Having recalled that Russia had written off 90 percent of Iraq's debt, Putin said, “We planned to help and support the new Iraqi leadership in its desire to rebuild the economy, and we said that the Iraqi leadership would be benevolent to our companies' entering the Iraqi market.”

Alekperov thanked Putin for support. He said that the prime minister's active position had allowed the company to win the tender for the development of the oil field despite fierce competition. “This is in fact a tremendous project,” the CEO said, adding that special attention during the implementation of the project would be given to security.

“We pay a great deal of attention to security systems because the security of people is our priority. We have reserved special funds for security,” he said.

Alekperov assured Putin that LUKOIL would fulfil all of its obligations. “We will not let you down and will fulfil all of the contract terms,” he said.

Iraq's West Qurna field is believed to hold 8.6 billion barrels of oil. The onshore block is now producing about 280,000 barrels per day and expected to ramp up to 600,000 bpd. Iraq plans to award six 20-year oil contracts and two 20-year gas contracts in Basra, Missan, Kirkuk, Akkas, and Mansouria. The bidding round for the Iraqi assets had reportedly attracted 32 oil and gas companies including international oil majors ExxonMobil and Shell.

West Qurna was the focus of discussions in 2009, during a visit to Moscow by a large delegation led by Iraqi Prime Minister Nouri al-Maliki. LUKOIL led a Russian consortium that had obtained a PSA for West Qurna-2 in a 23-year, 3.7 billion U.S. dollar deal signed in 1997 with Saddam's government. But Saddam's government tore up that deal in 2002. LUKoil has since lobbied for the current Iraqi government to honour the PSA, though Nouri told Putin the LUKOIL-led group could bid for a 20-year EDP-RSC for West Qurna-1, as in the case of other IOCs bidding for the first and second rounds.

Phase-2 West Qurna production for 23 years under the 1997 deal was to average 580,000 barrels a day, with a maximum output of 660,000 barrels a day for ten years. A JV company was set up with the Iraqi State Oil Marketing Organisation (SOMO) to hold 25 percent; and 75 percent was held by the Russian group as follows: 68 percent for LUKOIL, 3.5 percent for Zarubezhneft (in charge of Russia's foreign E&P projects), and 3.5 percent for VO Mashinoimport which trades in equipment. The JV was to take 10 percent of the oil production, with the rest going to the Iraqi Ministry of Oil.

Preliminary work on the field was to begin before the lifting of the U.N. sanctions, with the group to use Russian-owned equipment left behind in late 1990. The Russian group was to spend 200 million U.S. dollars during the sanctions period and lend Baghdad 100 million U.S. dollars for equipment. About 600 wells were to be drilled and Iraqis were to be trained.