Chevron enters exclusive talks for Iraq's giant West Qurna 2 oil field
Deal follows Lukoil's exit from 460,000 barrel-per-day field due to US sanctions
Chevron has entered into exclusive negotiations to take over operations of Iraq's West Qurna 2 oil field, one of the world's largest petroleum reserves, marking a significant expansion for the $369 billion energy giant as Russia's Lukoil exits the project under US sanctions pressure.
The California-based oil major signed a framework agreement with Iraq's state-run Basra Oil Company on February 23 to begin exchanging confidential data and commence exclusive talks for the field, which produces approximately 460,000 to 480,000 barrels of crude per day. The move follows Lukoil's declaration of force majeure in November 2025 after the US and UK imposed sanctions on Russia, triggering the Russian company's required divestment from the project by February 28.
West Qurna 2 holds an estimated 13 billion to 14 billion barrels of recoverable reserves, accounting for roughly 10% of Iraq's total crude output and about 0.5% of global oil supply. The field represents a substantial addition to Chevron's production portfolio as the company seeks to strengthen its position in the Middle East, home to some of the world's lowest-cost oil reserves.
Iraq's cabinet approved an "amicable settlement" with Lukoil to transfer operational control to the Basra Oil Company on a temporary basis, preventing potential production disruptions during the transition. The framework agreement involving Basra Oil Company, Lukoil, and Chevron facilitates the temporary contract shift before Chevron's potential reassignment as the new operator.
Chevron shares climbed 0.5% to $184.85 in afternoon trading on Monday, outperforming the broader energy sector as investors welcomed the strategic opportunity. The stock has gained nearly 47% over the past year, bolstered by the company's $53 billion acquisition of Hess in 2025 and now this potential expansion in Iraq.
However, Chevron is pressing Iraqi authorities for improved contractual terms before finalizing any deal, seeking to shift from the previous service contract model to a more favorable profit-sharing arrangement. The company is negotiating with Iraq's Ministry of Oil as it seeks to enhance the economics of the project, which previously operated under terms that some analysts considered less attractive to Western majors.
The agreement requires approval from Iraq's Council of Ministers and, for specific steps, authorization from the US Office of Foreign Assets Control, adding regulatory complexity to the transaction. Lukoil previously held a 75% stake in the field, with ambitions to increase total production capacity to 800,000 barrels per day by 2025—a target that Chevron may now seek to pursue under improved terms.
Analysts at multiple firms have characterized Chevron's proactive engagement with Baghdad as a signal of potential long-term growth, noting that the West Qurna 2 acquisition would significantly bolster the company's international production base. The field's existing infrastructure and substantial reserves provide a platform for near-term production growth without the lengthy development timelines associated with greenfield projects.
The deal underscores how Western energy companies are positioning themselves to fill gaps left by Russian operators exiting international projects under sanctions pressure. Iraq, as OPEC's second-largest producer, views West Qurna 2 as crucial to achieving its goal of increasing overall output capacity, and Chevron's technical expertise and capital could help accelerate those ambitions.
Chevron's move into Iraq also follows the company's broader international expansion strategy, which has included significant investments in Kazakhstan, Australia, and the Gulf of Mexico. The company reported $186 billion in revenue over the trailing twelve months, with operating margins of 9.3% and a dividend yield of 3.7%.
The exclusive negotiation period is expected to last several weeks as Chevron evaluates technical data and negotiates final terms with Iraqi authorities. Any eventual agreement would represent Chevron's first major operational foothold in Iraq's southern oil fields, positioning the company alongside other international majors including BP and ExxonMobil, which operate in the country's northern region.