Page 8 - FSUOGM Week 45 2019

FSUOGM PERFORMANCE FSUOGM
Lukoil reports mixed output results in Q3
RUSSIA
Lukoil is generating much of its output growth from overseas, but its international exploration work has had mixed success over the years.
THIRD-QUARTER oil output at Russia’s largest independent producer Lukoil climbed 0.2%, the company said on November 11.
Oil production, excluding contributions from Lukoil’s West Qurna-2 project in Iraq, rose to 21.64mn tonnes (1.72mn barrels per day, bpd) in the three months ending September 30, up from 21.353mn tonnes in the previous quarter.
Overall hydrocarbon output, also exclud- ing West Qurna-2, fell to 2.308mn barrels of oil equivalent per day, from 2.324mn boepd in the previous three months, owing to a drop in gas production to 8.26bn cubic metres from 8.38 bcm.
Over the first nine months of the year, Lukoil’s non-West Qurna-2 production was up 1.6% at 2.337mn boepd, with oil output rising 0.6% to 65.4mn mt and gas extraction expanding 4% to 25.61 bcm.
Growth this year came largely from Lukoil’s overseas projects, particularly its gas fields in Uzbekistan. The company ramped up gas out- put in the Central Asian state by 9% year on year in the nine-month period to 10.3 bcm, with its overall international production surging 10.6% to 12.43 bcm. In contrast, its gas production in Russia slumped 1.6% to 13.18 bcm.
Similarly, Lukoil’s oil production in Russia was up only 0.6% at 61.49mn tonnes, whereas
its overseas output increased by 3.5% to 2.75mn tonnes.
Lukoil is investing more in its international business to offset decline at mature fields in Western Siberia. Last month it took a 5% stake in Abu Dhabi’s offshore Ghashi gas concession, expected to produce more than 40mn cubic metres of gas and 12,000 barrels of liquids daily. According to Russia’s Kommersant, the com- pany could expand its involvement in Ghasha even further.
Still, Lukoil’s success rates overseas have been less than stellar.
“We have a cautious stance on the international M&A activity of Russian companies, including Lukoil, given their track record,” VTB Capital said in a research note on November 12. Between 2008 and 2016 Lukoil wrote off $2.4bn as a result of dry wells in Africa, Romania, Vietnam and Saudi Arabia and other regions, it said, out of a total of $16.7bn the company spent on international off- shore exploration during the period.
Lukoil’s production rates moving forward will depend greatly on whether any changes are made to the OPEC+ agreement commit- ting Russia and other producers to keep their output in check. Parties to the deal will discuss whether to deepen the cuts when they next meet in December – a proposal that Lukoil CEO Vagit Alekperov has said he opposes. ™
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Week 45 13•November•2019