As Iraq repays debt, Lukoil pledges to unlock investment

Fri Jun 3, 2016 6:51am EDT
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By Dmitry Zhdannikov

VIENNA (Reuters) - Iraq has positively surprised oil majors by starting quickly to repay accumulated debts, the head of Russia's Lukoil said, pledging more investment to allow OPEC's second-largest producer to maintain stellar output growth.

Iraq has become the world's fastest-growing oil producer with output up 50 percent since it signed contracts worth tens of billions of dollars with the likes of Lukoil, BP, Exxon Mobil and Royal Dutch Shell at the end of the last decade to help develop its huge oilfields.

But growth in production to around 4.5 million barrels per day (bpd) has lagged initial plans as oil majors have repeatedly complained about red tape, poor security and rising debts.

Debt repayment to majors for their investments has slowed even further over the past two years as oil prices collapsed - but Vagit Alekperov, the chief executive and a major shareholder of Lukoil, said the situation was changing.

"Iraq is very actively repaying the operators. The situation has changed dramatically," Alekperov told Reuters in an interview on the sidelines of an OPEC meeting in Vienna where he met several of the organization's ministers and officials.

Hit by low oil prices, Iraq is expected to have a financing gap of $17 billion this year unless it can secure more funding, according to the International Monetary Fund. The cost of fighting Islamic State militants is another burden.

In May, Iraq reached a $5.4 billion standby agreement with the IMF that could unlock $15 billion more in international assistance over the next three years.

"We know about the IMF talks and we know that the IMF makes it conditional for Iraq to pay back the contractors," Alekperov said.   Continued...

A fuel price board is pictured at a Lukoil petrol station in the West Siberian city of Kogalym, Russia, January 25, 2016.  Picture taken January 25, 2016. REUTERS/Sergei Karpukhin