Lukoil Declares Force Majeure at Iraq's West Qurna-2 Oilfield Amid Sanctions

Lukoil, Russia's second-largest oil company, has declared force majeure at the West Qurna-2 oilfield in Iraq, following the imposition of Western sanctions that have severely disrupted its operations. This declaration allows Lukoil to suspend its contractual obligations due to circumstances beyond its control. The sanctions, enacted by the United States and the United Kingdom last month, have led to Iraq halting all cash and crude payments to Lukoil, which holds a 75% stake in the oilfield.

Moscow TimesThe Straits TimesOil PriceLukoil Halts Iraq Oilfield Work, Citing Force Majeure as Western Sanctions BiteAl Monitor

The sanctions against Lukoil and Rosneft, Russia's largest oil company, were part of a broader strategy by the U.S. government, under President Donald Trump, to exert pressure on Moscow amid ongoing geopolitical tensions related to the war in Ukraine. The sanctions specifically target key subsidiaries of Lukoil involved in oil and gas development, significantly impacting its international operations.

Lukoil Halts Iraq Oilfield Work, Citing Force Majeure as Western Sanctions BiteOil PriceThe Straits TimesLukoil declares force majeure on Iraq oil shipments following U.S. sanctions

The West Qurna-2 oilfield, located 65 kilometers northwest of Basra, is one of the largest oilfields in the world, producing approximately 480,000 barrels per day, which accounts for about 9% of Iraq's total oil output. Following the sanctions, Iraq's state oil marketing company, SOMO, has canceled three scheduled crude oil cargo loadings from Lukoil for November. An Iraqi oil industry official indicated that if the issues leading to the force majeure declaration are not resolved within six months, Lukoil may shut down production and withdraw from the project entirely.

Moscow TimesThe Straits TimesAl MonitorLukoil Halts Iraq Oilfield Work, Citing Force Majeure as Western Sanctions BiteOil Price

Lukoil communicated to Iraq's oil ministry that "force majeure conditions" prevent it from continuing normal operations at the West Qurna-2 field. An Iraqi official noted that payments owed to Lukoil would remain frozen until a contractual adjustment is made to facilitate payments through non-sanctioned intermediaries. The situation has left Lukoil's future in Iraq uncertain, as it seeks to navigate the complexities of international sanctions.

Moscow TimesThe Straits TimesAl MonitorLukoil declares force majeure on Iraq oil shipments following U.S. sanctions

Critics of the sanctions argue that they disproportionately affect not only Russian companies but also the economies of countries reliant on Russian oil, such as Iraq. The sanctions have led to significant operational challenges for Lukoil, which has been forced to terminate the services of all non-Russian foreign staff at the West Qurna-2 site, retaining only Russian and Iraqi personnel.

Lukoil Halts Iraq Oilfield Work, Citing Force Majeure as Western Sanctions Bite

• “Lukoil was said to have informed Iraq’s oil ministry last Tuesday that “force majeure conditions” prevented it from continuing normal operations at the West Qurna-2 oilfield.” — Lukoil Communication to Iraq's Oil Ministry

Moscow Times

• “If the reasons behind the force majeure are not resolved within six months, Lukoil will shut production and exit the project entirely, a senior Iraqi oil industry official said.” — Senior Iraqi Oil Industry Official

Al Monitor

As Lukoil navigates the implications of the sanctions, the company has expressed intentions to sell its international assets, including the West Qurna-2 oilfield. However, a proposed sale to the Swiss commodity trader Gunvor was withdrawn after the U.S. Treasury Department expressed disapproval, labeling Gunvor as a “Kremlin puppet.” The future of Lukoil's operations in Iraq remains contingent on resolving the sanctions-related issues and finding a viable path forward for its international business.

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