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Lukoil deal collapse puts $1.8bn of Iraq projects at risk

10 November 2025

Commentary
Wil Crisp
Oil & gas reporter

The collapse of Lukoil’s deal to sell its foreign assets to Swiss commodities trader Gunvor has increased uncertainty for Iraqi oil projects connected to the West Qurna 2 and Block 10 oil fields.

Lukoil holds a 75% stake in the West Qurna 2 oil field and an 80% stake in Iraq’s Block 10, which has an area of 5,800 square kilometres and is located 150 kilometres from the West Qurna 2 field.

Active projects in these two fields are currently worth around $1.8bn, according to regional project tracker MEED Projects.

One industry source said: “Currently, there is no clarity about what is going to happen at these fields, and Lukoil is quickly running out of time to find a way to work around sanctions issues.”

The US Treasury Department announced sanctions on Lukoil on 22 October, and companies are running out of time to stop trading with Lukoil, which is Russia’s second-largest oil company.

The US Treasury Department has issued a licence giving companies until 21 November to wind down any transactions.

The sanctions have already caused significant disruption to Lukoil’s operations in Iraq, as well as to the operations of its partners.

Earlier this month, Iraq's state-owned oil marketing firm Somo cancelled the loadings of three crude oil cargoes from the West Qurna 2 field.

The cargoes were due to load on 11 November, 18 November and 26 November.

One industry source told MEED: “Iraq is not in a position where it can violate these sanctions. It wants to do anything it can to avoid a negative reaction from the US and Donald Trump.”

Contractors that could be impacted by project disruption include Italy’s Sicim, which is executing projects at West Qurna 2, and China’s CPECC, which has design contracts in West Qurna 2 and Block 10.

Active projects

The active projects at the West Qurna 2 field include two projects that are currently under construction.

The first is a project to develop gas compression and dehydration facilities, which is worth $619m.

The second is the second phase of a project to develop water treatment and water injection facilities, which is worth $320m.

Both of the project contracts were awarded to Sicim in January 2023 and are due to be completed before the end of 2027.

Another West Qurna 2 project that could be impacted by the sanctions is the Yamama gathering system project, which is expected to be worth more than $400m.

Early design work is currently ongoing for this project and its scope is expected to include new well pads, wells and tie-ins to pilot wells.

Bids have already been submitted for another related project focused on the Yamama formation. The scope of this project includes well pads and roads and it has an estimated value of $15m.

Block 10

The sanctions on Lukoil could also disrupt a planned project to develop the Eridu oil field, which is located in the Block 10 concession.

Last month, Iraq’s Oil Minister, Hayyan Abdul Ghani Al-Sawad, held meetings with Lukoil and Japan’s Inpex to discuss the Eridu oil field development.

In a statement that was released in October, Iraq’s Oil Ministry said that Lukoil had received approval for the “Declaration of Commerciality” and the preliminary development plan for the Eridu project from state-owned Thi-Qar Oil Company (TOC).

The ministry estimated that production at the field could reach 250,000 barrels a day (b/d) of oil, with an estimated oil production in the first phase of 30,000 b/d expected to be achieved later this year.

The project to develop the Eridu oil field is estimated to be worth around $450m, according to MEED Projects.

 

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Wil Crisp

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