Lukoil Launches New Oilfield in the Russian Arctic

Russia's second biggest oil producer Lukoil launched a new oilfield in the Russian Arctic on Tuesday, an effort to stem output falls attributed to the company's declining deposits, which are mostly located in Western Siberia.

 

The launch of the field, in the Yamal region, underlines how hard it is for the Russian authorities to get their oil companies to freeze or cut output as part of a potential deal with the Organization of the Petroleum Exporting Countries.

 

It also shows how Russia is cranking up production by launching new fields even though President Vladimir Putin pledged to help support global efforts to curb oil oversupply.

 

Lukoil, which is pumping around 2 million barrels of oil per day, a little less than OPEC member Venezuela, is switching its focus to its upstream business at home and abroad. Its key asset outside Russia is the West Qurna-2 oilfield in Iraq where it produces around 450,000 barrels per day.

 

The new field launched on Tuesday, Pyakyakhinskoye, is among the biggest three hydrocarbon deposits to be opened up in Yamal in recent years. Lukoil values the field's reserves at 86 million tonnes of oil and gas condensate, as well as 253 billion cubic metres of gas, as measured by Russian standards.

 

Lukoil plans to produce 200,000 tonnes of oil and gas condensate at the field in 2016, boosting output to 1.5 million tonnes (30,000 barrels per day) of oil and 3 billion cubic metres of natural gas in 2017.

 

A company official said that Lukoil's investments in Pyakyakhinskoye totalled more than 100 billion roubles ($1.6 billion) and that the deposit would start producing its maximum output of 1.7 million tonnes of oil in 2021.

 

Peak production would last until 2029, the official said.

 

Lukoil is aiming to slow the rate of its production decline in West Siberia to 1.5-2.5 percent in 2017 from a forecast 6.5-7 percent this year.

 

It hopes the Pyakyakhinskoye oilfield, as well as the Filanovsky field in the Caspian sea, will compensate for the output decline in West Siberia.

 

Lukoil's production in Russia is seen at around 86.5 million tonnes of oil this year and at 87.5-88 million in 2017.

 

The company is controlled by its head, Vagit Alekperov, who owns just over 20 percent of Lukoil, which he co-founded in the 1990s and turned into a firm with a presence in more than a dozen countries.

 

His partner, Vice-President Leonid Fedun, has a little less than a 10 percent stake. Fedun has said Lukoil is ready to cap its oil output as part of a potential agreement with OPEC.