The president of Russian oil giant OAO Lukoil has said that the company will cut its Iraqi production by 30%, following a decision by the Iraqi government to reduce output in an effort to maintain higher pricing. The Russian company plans to reduce production from 1.8 million barrels a day from the West Qurna-2 field to 1.2 million barrels a day.
Iraq’s total production has topped 3.2 million barrels a day in December, and just last Saturday the government said it hopes to reach its goal of 4 million barrels a day by 2014. According to a report at MarketWatch, Lukoil’s president said:
Iraqis came to the conclusion that they don’t need peak output, which will result in the creation of excessive infrastructure. And when oil production starts to decrease, that would create an unstable macroeconomic and microeconomic situation for Iraq.
Lukoil’s statement appears to fly in the face of other recent reports on Iraqi production, although BP PLC (NYSE: BP) has requested a reduction in its contracted production from the giant Rumaila field in the southern part of the country. The Financial Times reported last week that BP wants to cut production at Rumaila from its targeted 2.85 million barrels a day to just under 2 million barrels a day. The field currently produces about 1.35 million barrels a day.
BP cited the lack of infrastructure, export opportunities and an abundance of government bureaucracy as its reasons for seeking a reduction in its contracted target. The production cutback would have the effect of extending the lives of both West Qurna-2 and Rumaila by several years.
The Iraqi government has set a target of 12 million barrels a day by 2020, but that figure is widely suspect. The International Energy Agency estimates that Iraqi production will reach about 6.1 million barrels a day by that date.
Brent crude trades down slightly this morning, at $110.99 a barrel, almost $20 a barrel more than WTI.