Page 12 - FSUOGM Week 41 2021

FSUOGM INVESTMENT FSUOGM

Lukoil expands Shah Deniz stake

in $2.25bn deal with Petronas

AZERBAIJAN RUSSIAN private oil producer Lukoil has sea’s Russian zone, two of which are in produc-
penned a $2.25bn deal to buy an extra 15.5% tion, and it also has exploration rights to several
The Russian producer is stake in the BP-led Shah Deniz gas field off Azer- fields off the coast of Kazakhstan.
doubling down in one of baijan from Malaysia’s Petronas, raising its over- The company is seeking new opportunities in
its core regions. all shareholding at the project. the Caspian region to offset decline at its mature
Lukoil is planning an expansion in the Cas- fields in Western Siberia.
pian Sea – a region it is counting on to deliver Analysts at VTB Capital (VTBC) estimate
growth over the coming years. Shah Deniz, the that the purchase could net Lukoil an extra
largest gas deposit in the sea, pumps gas to Geor- $0.5bn in EBITDA next year. If the company
gia, Turkey and Southeast Europe via the South- decides to finance the deal through debt, VTBC
ern Gas Corridor (SGC). said, its leverage would only increase to 0.2 net
The latest announcement comes after the debt to EBITDA, and the bank still expects
company agreed in late September to buy a 25% Lukoil to deliver a "healthy" 11% dividend yield
interest in the Shallow Water Absheron Penin- for 2021.
sula (SWAP) exploration project off Azerbaijan "Yet another upstream deal indicates Lukoil
from its operator BP, and it is also eyeing a role management is continuing to bolster the compa-
in developing two oilfields near Kazakhstan’s ny's geological opportunity set, addressing what
Kashagan oil project. we feel is a key weakness of the investment case,"
The deal’s closure is subject to conditions, BCS Global Markets commented.
including the approval of Azeri national oil Lukoil also launched construction of a
company (NOC) SOCAR, another shareholder second gas processing unit at its Stavrolen
at Shah Deniz, Lukoil said. Once the transaction petrochemicals complex in southern Russia
is concluded, Lukoil will be the second-biggest last week. This should enable the company to
shareholder at the field with a 25.5% interest process up to 5 bcm per year of associated gas
behind BP, which has 28.8%. The other share- from its North Caspian fields. Natural gas liq-
holders are Turkey’s TPAO (19%), SOCAR uids separated from the gas are used as feed-
(16.7%) and Iran’s NICO (10%). stock for petrochemicals, whereas the treated
Shah Deniz flowed 18.1bn cubic metres of gas gas itself can be sold to industrial consumers
and 3.6mn tonnes of gas condensate in 2020. The in Russia.
field’s second development phase was launched "In general, the commercialisation of the Cas-
in 2018, which should raise its annual output to pian gas reserves and the petrochemical invest-
26 bcm of gas and 5mn tonnes of gas condensate. ments make sense to use given the approved
Lukoil is already a seasoned operator in the subsidies for ethane- and LPG-based petro-
Caspian. It owns several oil and gas fields in the chemical production," Sberbank CIB said.™

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