Russia's oil company Lukoil and the Norwegian StatoilHydro won a joint bid on Saturday to develop Iraq's largest undeveloped oil field.

On the second day of the largest Iraqi postwar auction, the West Qurna-2 reservoir, with 12.86 billion barrels of oil in reserves, went to the Norwegian-Russian consortium after the preceding day had seen auctions won by Shell and China's CNPC.

Located in relatively calm and secure southern Iraq, West Qurna is expected to produce 1.8 billion barrels per day. Lukoil and StatoilHydro requested 1.15 dollars for each barrel extracted from the giant field. Lukoil will take 85 percent and StatoilHydro 15 percent.

The deals reached so far in the two-day auction promise to increase Iraq's oil production by more than 4.2 million barrels per day.

Underbidding the competition

The prices to develop the largest fields bid by oil companies have been lower than many expected.

"They were astonishingly low figures. But 2009 will be remembered as the year that Iraq opened its door to the international oil companies and then shut it. It's 10 fields and that's it," a senior oil executive told Reuters.

"So it's strategic for the oil firms, either you are here or you aren't and this is the chance. You have to think about it like that."

Oil fields were auctioned off to multiple firms, including a consortium led by the Russian firm Gazprom, France's Total and the Malaysia's Petronas.

But some fields near Baghdad and the northern city of Mosul were still considered too risky for the international firms and received no bids during the auction.

Security for the auction at the oil ministry in Baghdad was extremely tight after a string of bombings targeted various government buildings around the city on Tuesday.

Iraq has the world's third largest oil reserves at 115 billion barrels, behind Saudi Arabia and Iran. Oil sales make up 85 percent of Iraq's revenue.

sjt/AFP/Reuters/AP
Editor: Kyle James