Lukoil Faces Sanctions Fallout with West Qurna-2 Force Majeure

Lukoil has declared force majeure at Iraq's West Qurna-2 oilfield after Western sanctions from the U.S. and Britain hampered operations. Iraq has halted payments to Lukoil, and the company has threatened to cease operations if conditions do not change within six months. Sanctions complicate future contracts.

Lukoil has announced a force majeure situation at Iraq's West Qurna-2 oilfield, according to four sources familiar with the situation. The announcement comes in the wake of Western sanctions on the Russian oil giant, obstructing its ability to function efficiently in the region. Lukoil was unavailable for immediate comment, Reuters reported.

Sanctions imposed by the United States and Britain on Rosneft and Lukoil have led Iraq to suspend all monetary and crude payments to Lukoil, as per information from three sources. Lukoil informed Iraq's oil ministry about insurmountable operational challenges last Tuesday, warning that if circumstances do not improve within six months, it might exit the project altogether.

Furthermore, Iraq's state oil company, SOMO, has canceled crude cargo loadings from Lukoil's production at West Qurna-2. This giant oilfield, Lukoil's most valuable foreign asset, accounts for a substantial 9% of Iraq's total oil production. Under U.S. sanctions, payments from Iraqi operations to Lukoil remain frozen until a resolution is found.

(With inputs from agencies.)