The Iraqi Cabinet has approved a settlement agreement with Lukoil, facilitating the change of control over the West Qurna 2 oilfield. This field, with estimated recoverable reserves of about 13 billion barrels, is Lukoil's largest international upstream asset. The Russian company is divesting it due to U.S. sanctions imposed in October in response to the war in Ukraine.

Temporary Operation and Sale Process

Basra Oil Company (BOC) will operate West Qurna 2 on a temporary basis. This follows Lukoil's invocation of force majeure in November and a subsequent Iraqi government resolution in early January. The field is being sold to U.S. investor Carlyle Group, with a U.S. deadline to complete the sale set for 28 February. The Office of Foreign Assets Control (OFAC) extended this deadline to 28 February in January and has not announced a further extension.

Details of the Settlement and Transaction

The approved "amicable settlement" agreement aims to prevent post-deal arbitration disputes by covering the payment of due invoices and the employment of foreign personnel. The Iraqi government specified that taxes on foreign employees' salaries will be treated as final state revenue. Lukoil operated the field under a service contract, receiving a share of oil production for international sale, though sanctions hindered this ability. The company had extended its agreement until 2045 with plans to more than double production to 800,000 barrels per day, having produced over 1 billion barrels between 2014 and November 2021.

Broader Divestment and Compliance

Lukoil is selling its subsidiary, Lukoil International, which holds its international assets, to Carlyle. Carlyle confirmed the deal is structured for full compliance with OFAC policies. Besides Carlyle, Lukoil has reportedly engaged with other potential buyers, including Chevron and Quantum Energy Partners. This sale is part of a broader divestment, as Lukoil has already committed other international assets, such as holdings in Kazakhstan and offshore fields in Mexico, to buyers.