Lukoil Faces Production Halt at Major Iraqi Oilfield Amid Sanctions Crisis

Lukoil has announced a force majeure situation at a significant oilfield in southern Iraq following disruptions to its operations caused by Western sanctions, as reported by Reuters on Monday, citing sources familiar with the situation.

The West Qurna-2 oilfield, which is among the largest globally and represents Lukoil’s most important foreign asset, is situated 65 kilometers (40 miles) northwest of Basra and has a production rate of approximately 480,000 barrels per day, making up around 9% of Iraq’s total oil output.

As reported by Reuters, Iraq’s state oil authorities have halted all cash and crude payments to Lukoil in alignment with U.S. and British sanctions that were enacted last month. One Iraqi official indicated to the news agency that payments owed to Lukoil will remain on hold until Baghdad can identify non-sanctioned intermediaries to facilitate transactions.

Lukoil reportedly informed Iraq’s oil ministry last Tuesday that «force majeure conditions» were hindering its ability to carry out regular operations at the West Qurna-2 oilfield. According to an Iraqi official, the contract permits such a declaration, providing the company legal safeguards against penalties.

A senior official in the Iraqi oil sector noted that Lukoil could completely cease production and withdraw from the project if the situation is not rectified within six months, as stated by Reuters. The agency did not clarify what solutions might be pursued to address the factors leading to the force majeure declaration.

Additionally, it was reported that the sanctions compelled Iraq’s national oil company SOMO to cancel three crude shipments from Lukoil’s production share last week. Approximately 4 million barrels of crude that had been designated for Lukoil as in-kind payment for November have reportedly been rescinded.

Separately, Lukoil is said to have terminated all contracts with foreign personnel at the field last Friday, retaining only Russian and Iraqi workers on site.

Lukoil commenced operations at West Qurna-2 in 2014, holding a 75% stake in the project and initially planning investments exceeding $30 billion.

Lukoil, the largest private oil company in Russia, has not issued any public statements regarding the force majeure situation in Iraq.