Lukoil May Cut Price to Close Kazakh Deal with Sinopec

Russia's second largest oil company Lukoil is in talks with China's Sinopec over a stalled sale of assets in Kazakhstan, and is ready to cut its price by up to 10 percent, industry sources said on Thursday.

 

Lukoil signed a sale and purchase agreement last year for the sale to Sinopec of a 50 percent stake in Caspian Investment Resources Ltd, a company with various stakes in four hydrocarbon-production projects in Kazakhstan. However Sinopec has failed to complete it, according to Lukoil.

 

In February, Lukoil said it had commenced arbitration proceedings in London against Sinopec over the uncompleted $1.2 billion deal, although Lukoil CEO Vagit Alekperov has expressed hope for an out-of-court settlement.

 

"The discount would be less than 10 percent of the initial price," a source close to Lukoil told Reuters.

 

The deal was initially announced when the price of oil stood at above $100 per barrel. Since then it has halved.

 

"It's hard to agree on such projects when the prices on the market are so low," another source said.

 

A third source said that Lukoil could sell the assets for "just over $1 billion".

 

Lukoil declined to comment.

 

Caspian Investment Resources' fields are located mainly in the western part of Kazakhstan which supplies oil to Europe via Russia.

 

Lukoil's share of production through the venture was around 30,000 barrels per day in 2013. Output from various small fields that the venture controls will soon peak or has done so already.