Chevron is taking another step toward expanding its footprint in Iraq, and is set to sign two memoranda of understanding on Friday that will move the U.S. supermajor closer to developing the giant West Qurna 2 oilfield and the Nassiriya project. The agreements aren’t binding, but they push negotiations forward on what could become one of Chevron’s biggest upstream investments in years.
West Qurna 2 is no small prize. The southern Iraqi field currently produces about 460,000 barrels per day after Iraq nationalized the asset earlier this year following U.S. sanctions on Russia’s Lukoil. Chevron entered exclusive talks for the field in February, and Friday’s agreement advances negotiations on the commercial terms needed for a final deal.
Nassiriya is smaller today but comes with significant exploration upside. Chevron and Iraq also signed an agreement in principle last year covering the field and four surrounding exploration blocks, giving the company another potential long-term growth platform in one of OPEC’s largest producers.
The oilfields aren’t the only reason Chevron is talking to Baghdad.
The company is also working with Iraq on technical studies for new export pipelines that would allow crude to reach the Mediterranean without passing through the Strait of Hormuz. Chevron is part of a consortium that signed an agreement earlier this month to evaluate possible routes, including options that could connect Iraq’s producing fields with Syria or other regional export corridors.
The urgency is obvious. Iraq exports the overwhelming majority of its crude through the Persian Gulf. The Hormuz crisis forced the country to slash production after tankers were unable to leave the Gulf, exposing one of Baghdad’s biggest strategic weaknesses. Production capacity doesn’t do much good if there’s nowhere to send the barrels.
The United States has thrown its support behind rebuilding the long-idled Kirkuk-Baniyas pipeline linking Iraq to Syria’s Mediterranean coast, while other overland routes remain under study. Washington wants American companies involved, and Iraq wants an insurance policy against another Hormuz shutdown.
Chevron appears happy to help with both.
The agreements are to be signed as Iraqi Prime Minister Ali al-Zaidi visits Houston following meetings with President Donald Trump in Washington this week. Iraq is looking for American investment to raise oil production. Chevron, meanwhile, is looking beyond the Strait of Hormuz. After the biggest oil supply disruption in history, that has become just as important as finding the next giant field.
By Julianne Geiger for Oilprice.com
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