Statoil reportedly may be looking to dispose of its stake in the West Qurna 2 field development project in Iraq as security in the country deteriorates following the withdrawal of US forces amid escalating political tensions.

The Norwegian state oil company intends to meet with Oil Ministry officials in the immediate future to discuss the project, MEES reported.

Statoil is a partner with Russian operator Lukoil in a joint venture to develop the giant West Qurna 2 oilfield after the pair were awarded a 20-year service contract in 2009.

Lukoil chief executive Vagit Alekperov said recently the project was on course to start production from the first phase of the project in late 2013, more than a year later than originally planned as the Iraqi ministry has dragged its heels in approving contractors for the scheme.

However, the pair are still waiting for the green light from the Iraqi Cabinet to get moving on the first phase, which is targeting initial production of 400,000 barrels per day. The project ultimately aims to produce 1.8 million bpd from the field in southern Iraq.

Statoil, which holds an 18.75% stake in the project, has been restructuring its portfolio to focus more on exploration as it targets an increase in production to 2.5 million barrels of equivalent per day by 2020.

It is now focusing its investment strategy on exploitation of new discoveries in the North Sea and frontier Barents Sea, while it has also beefed up its assets in the US’ unconventional play with recent acquisitions.

However, the company remained tight-lipped on a possible exit from West Qurna.

“We are working with Lukoil as the operator to move the project forward and we never comment on any rumours regarding potential adjustments,” spokesman Baard Glad Pedersen told MEES.

Foreign oil operators have reported an extremely tough operating environment in southern Iraq, hitting investment returns in the southern oil producing region.

The increasingly high costs of stringent security required to protect oil installations from mounting violence, combined with stifling bureaucracy and rampant corruption, are also acting as major disincentives for oil companies.

In addition, there are practical obstacles such as problems in obtaining visas for key personnel while a ban on helicopters landing anywhere else than official airports prevents Medevac services for outlying oilfields.

The country has hit been rocked by several bomb deadly attacks since the pull-out of US troops at the turn of the year while a deepening government rift between the country’s Shia majority and Sunni minority has sparked a political crisis.

Source: Upstream Online