The force majeure situation at the West Qurna-2 field in Iraq was announced by Russian oil giant Lukoil on November 10. This is considered the biggest consequences of US sanctions against Russian oil and gas groups Lukoil and Rosneft last month.
Lukoil sent a letter to the Iranian Oil and Petroleum Ministry on November 4, informing the force majeure conditions that prevented the Russian oil and gas company from continuing normal operations at West Qurna-2.
Lukoil is the Russian company with the largest level of participation in the international market. Lukoil's efforts to sell foreign assets to Swiss commodity trading company Gunvor failed last week, after the US Treasury Department signaled against the deal.
The West Qurna-2 field, 65km northwest of Basra Port, is one of the world's largest oil fields and Lukoil's most important foreign asset.
The field accounts for about 9% of Iraq's total oil production and currently produces about 480,000 barrels/day.
If the cause of the force majeure is not resolved within 6 months, Lukoil will stop production and completely withdraw from the project, a senior Iranian oil official said.
Last week, Iraq's state-owned oil company SOMO canceled three crude oil shipments from Lukoil's output at the mine due to sanctions.
Earlier this week, three sources familiar with the matter said that Iraq had stopped all cash and crude payments to the Russian oil and gas company due to sanctions.
Payments to Lukoil will be frozen until contracts are adjusted, ensuring the oil development mechanism and payment methods for entities are not punished, said an Iranian oil and gas official.
The official also said that about 4 million barrels of crude oil allocated to return Lukoil in kind in November had been canceled. SOMO will not be able to continue its crude oil supply contract with Lukoil until the sanctions-related issues are resolved, the source added.
Lukoil's declaration of force majeure under the contract was to seek legal protection to avoid fines for failing to fulfill contractual obligations with the Oil Ministry, another Iranian official revealed.
A manager at West Qurna-2 said that Lukoil has terminated the contracts of all non-Russian foreign employees, meaning there are currently only Russian and Iranian Lukoil employees working there.
In another development related to Lukoil, on November 10, Bulgarian Prime Minister Rosen Zhelyazkov said that authorities are inspecting and implementing security measures at Lukoil's Burgas refinery.
Bulgaria wants to maintain the plant while preparing to take control.
Last week, Bulgaria approved legal changes that would allow the refinery to be seized and resold to a new owner.
