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28 Aug, 2009 15:49

Production close to peak as Russian oil major looks internationally

Lukoil is forecasting stagnating oil production in Russial. The government plans huge investment in oil sector to boost production by 10% over the next twenty years, but oil majors say it’s not the matter of money.

Lukoil’s output grew 4% in the first half of the year. Despite company’s positive dynamics its Vice-President, Leonid Fedun says the overall oil production in Russia will eventually fall.

That may happen despite over a trillion dollars of investment in oil sector planned by the government by 2030. The problem is not in the lack of investment but who gets the licenses.

“To increase Russia’s overall oil output by 10% in twenty years, the government should review the development strategy of Russia’s oil deposits. The current government strategy suggests that only two state owned energy companies will be able to boost production – Gazprom and Rosneft – and it’s not realistic.”

Lukoil managed to boost its production this time due to new oil fields in Russia and Pavel Sorokin, analyst at Unicredit Secuirities, expects the company will maintain this output level through out the year.

“We expect an increase of production for the whole of the year around 3 to 4%. We see of course decline in production in West Siberian field but South Tulchiya should compensate for this.”

But Lukoil’s managers believe the company’s future output will largely depend on Lukoil’s operations abroad. Now Russia’s second oil major is participating in a tender for Iraqi huge deposits.

The company’s aim is to develop The West Qurna 2 field with possible production volumes of 2 billion barrels per year.

It’s the second chance for Lukoil after it failed to renew the contract on Qurna 2 signed with the former Saddam Hussein regime. Russia, which wrote off $12 billion worth of debts to Iraq, was promised that Lukoil would be a key bidder in any tender.