CEO says Russia’s Lukoil raises hydrocarbon output by 4% in 2018

DAVOS, Jan 23 (PRIME) -- Russian oil major Lukoil has raised production of hydrocarbons by 4% on the year in 2018, CEO Vagit Alekperov told reporters on Wednesday on the sidelines of the World Economic Forum without providing absolute figures.

“We are satisfied with the achievement in 2018, our production of hydrocarbons grew 4%,” he said.

Lukoil also plans to keep its investment program at the level of U.S. $8 billion in 2019, he added.

OPEC+ DEAL

The company will reduce its oil production by 7,000 barrels per day in January as compared with October 2018, and will reach the agreed level of 30,000 barrels in April, he said.

In November 2016, OPEC and non-OPEC states including Russia agreed to reduce their oil output to rebalance the market, then raised the production quotas. In December 2018, the participants of the deal decided to cut production again by 800,000 barrels per day for OPEC and 400,000 barrels per day for non-OPEC states, including 228,000 barrels per day for Russia, from the level of October 2018.

“We will cut 7,000 barrels a day in January. We will speed up the reduction in February and March, and reach the level on which we agreed before in April,” Alekperov said, adding that the company will not raise its 2019 oil production to the planned level of 84 tonnes due to the OPEC+ deal.

“The company has potential for growth…Without the OPEC+ deal, we aimed at 84 million tonnes of oil and 128–130 million tonnes of hydrocarbons,” he said, adding that the deal would mean a cut of 1 million tonnes of oil from the 2019 output.

When asked about a possible prolongation of the deal, he said, “It is efficient in short periods of time, but it may have an impact on oil production in the long run, as well as on attraction of new technologies for development of new fields, and on investment activity in Russia.”

“I think that we should look at results of the first six months of the year and how events around Iran will unfold in April, and make decisions on the basis of that. For the first half of the year, the deal is efficient,” he said, adding that the oil price of $60 per barrel is acceptable for the Russian budget and for the company.

OTHER PROJECTS

Lukoil is considering buying upstream assets in other countries, as only small sites are left undistributed in Russia. “Reserves of 5, 8, or 10 million tonnes are not of interest for the company. Still, we participate in tenders that the Natural Resources and Environment Ministry announces,” he said.

Oil major Rosneft and Lukoil signed an agreement on transshipment of oil through Lukoil’s Varandei terminal until the end of June. Previously, Rosneft’s subsidiaries Bashneft and Bashneft-Polyus filed a complaint to the Federal Antimonopoly Service against the prices set for the transshipment by Lukoil.

“The Trebs and Titov field is developing at a stable rate, we signed a contract for oil transshipment for the first half of 2019, everything has stabilized there,” he said.

Lukoil also decided not to restructure or sell commodity trader Litasco. “We have been looking at the asset for a long time, they recommended we spin it off, but it is not just a trade company now, it is technological as well,” he said.

Saudi Aramco and Lukoil are still discussing the Luksar project for production of natural gas and gas condensate in Saudi Arabia. “We have proven our responsibility and capability of solving difficult technical tasks, but economic factors – especially the gas price – prevent economically sound development of the field. That is why we’ve decided to close our office in Saudi Arabia,” he said.

The company also plans to discuss the necessity of floating excises on fuel with the Russian government in February. “It should help stabilization and protect our consumers from fluctuations in prices for oil products…I think that these consultations will be launched at the beginning of February,” he said.

Lukoil has also spent slightly more than $1 billion on its share buyback program out of $3 billion earmarked on that, he added.

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