Chevron Negotiates Improved Terms with Iraq for Lukoil Oilfield Acquisition

Chevron's Acquisition Plans and Negotiations

By Dmitry Zhdannikov and Aref Mohammed

Background on Lukoil and U.S. Sanctions

BASRA/LONDON, Jan 27 - U.S. oil major Chevron is pushing Iraq to improve returns on the giant West Qurna 2 oil field as a condition for buying the project from Russia's Lukoil, three sources familiar with the matter said.

Iraq's Oil Production and Investment Strategy

Earlier this month, Iraq nationalised the oilfield after the U.S. imposed sanctions on Lukoil to put pressure on Russia to end its war in Ukraine.

Future Prospects for Chevron in Iraq

The sanctions made it difficult for Lukoil to operate its international operations including West Qurna, which is one of the world's largest oilfields, accounting for about 0.5% of global oil supply and nearly 10% of Iraq's output. 

Days after the nationalisation, Iraq's oil minister said talks were ongoing with Chevron regarding the field.

Lukoil has until February 28 to sell its assets under the U.S. sanctions.

CHEVRON, OIL MINISTRY IN TALKS ON TERMS

Chevron and the Iraqi oil ministry are in talks on improving the contractual terms, the three sources said. Any deal on new terms would require Iraq's cabinet approval, two out of the three sources said.

A Chevron spokesperson said the company does not comment on commercial matters. "Chevron has a diverse exploration and production portfolio globally and continues to assess potential opportunities," the representative said.  

"In all its activities, Chevron operates under a code of business ethics and complies with laws and regulations applicable to our business."

Iraq's oil ministry said on Tuesday that talks continued with Chevron.

"The negotiations are still ongoing, with many details remaining under discussion," the ministry told Reuters.

Lukoil did not respond to a request for comment.

FURTHER PUSH INTO IRAQ

A deal for Chevron in West Qurna 2 would mark a further push into Iraq for the U.S. oil major after it agreed to develop several fields in the country as part of an international expansion since completing a deal to acquire U.S. oil producer Hess for $53 billion in 2025. 

Iraq, the world's seventh-largest oil producer, has improved the terms of its oil contracts in deals signed with global oil majors in the past two years as it seeks to attract investment and increase output. 

Top oil companies including TotalEnergies and BP have signed deals with combined investment pledges of over $50 billion, marking a reversal of what had been an exodus of producers due to poor returns under prior contract terms.

Baghdad switched to profit-sharing agreements and away from service contracts to bring the oil majors back. 

Lukoil's West Qurna 2 project was under the earlier service contract agreements. The deal was one of the first projects signed by Iraq with oil firms after the U.S. invasion in 2003, and pays among the smallest returns among all Iraqi contracts, industry sources say.

Iraq's output has grown to more than 4 million barrels per day in 2025 from around 2.5 million bpd prior to the U.S. invasion in 2003. 

The country has failed to reach ambitious targets that Iraq promised after the war of raising capacity to 9-12 million bpd.

State-run Basra Oil Company has taken over the field's operations for 12 months while waiting for the ownership issue to be resolved, two officials at the firm told Reuters.

(Reporting by Aref Mohammed and Dmitry Zhdannikov; Additional reporting by Ahmed Rasheed and Stephanie Kelly; Writing by Alex Lawler; Editing by Simon Webb and Jan Harvey)