LUKoil, Sibneft Vie for Kuwaiti Fields

Oil majors Sibneft and LUKoil are contending for key roles in a delayed project to boost oil production in northern Kuwait.

A day after Russia said it was preparing to sign $40 billion worth of contracts with Iraq, a delegation led by Energy Minister Igor Yusufov on Monday opened discussions with officials from neighboring Kuwait on expanding economic and technical cooperation.

Talks focused on "Project Kuwait," a $7 billion investment project that would use foreign oil companies' technical know-how to double production at four oil fields in northern Kuwait.

Sheikh Ahmed al Fahd al Ahmed al Sabah, the head of the Kuwaiti delegation, also said Kuwait is interested in developing all-around relations with Russia, news agencies reported.

"Project Kuwait," conceived in 1997, has so far been held back by Kuwait's parliament, although Kuwaiti officials say it is now moving forward.

"We attach much importance to this program," Itar-Tass quoted Yusufov as saying.

Sibneft is the only Russian company that has been approved for a non-operator role by Kuwait's Supreme Oil Council.

"Sibneft is interested in diversifying its portfolio of upstream activities but, in doing so, we want to maintain the same level of returns that we have in Russia," said Sibneft spokesman Nick Halliwell.

LUKoil submitted documentation for the council's approval two years ago, said Nikolai Manvelov, a spokesman for LUKoil subsidiary LUKoil Overseas.

No. 1 oil company LUKoil has in past years been on a drive to expand its asset base around the globe. The firm owns refineries in Europe, filling stations in the United States and licenses to fields in the Caspian basin. LUKoil qualified earlier this year to participate in the development of Brazilian fields.

"Like any other oil company, we assign priority to any place with potential," Manvelov said. "And Kuwait fits the bill."

Kuwait has significant excess production capacity. The country holds an estimated 94 billion barrels of reserves, more than 9 percent of the world total, according to the U.S. Energy Information Administration.

Manvelov declined to estimate the amount of investment LUKoil is considering sinking into Kuwait, but said the company was looking for a 5 percent to 10 percent stake in the final consortium.

LUKoil has so far met with little success in the Middle East. The company has made little headway in developing the giant West Qurna deposit in Iraq since contracts were signed in 1997.

Manvelov said LUKoil has hope for Iraq, so much so that company officials inquired about how "Project Kuwait" could change relations with Iraq before going ahead with their application.

Neither LUKoil and Sibneft, however, can do anything but sit back and wait for Kuwait to open the tender.

"No one but the Kuwaitis know when this is going to happen," Manvelov said. "I know this sounds kind of pessimistic, but it may as well be when pigs fly."