Vagit Alekperov: "We’re waiting for the government to allow private companies access to the Arctic shelf" | 332 (February 2017)

Davos is a unique platform. Our company, and myself in particular, is a traditional participant in the discussions that go on here. We in our energy club discuss opportunities for investing in the oil & gas sector that will become available in 2017.

2017-04-14 13:45 Views 195

Arctic shelf

You’ve had a number of meetings here at Davos, including with international partners. What are they interested in, and how do they view Russia? Are they ready to invest in our country?

Davos is a unique platform. Our company, and myself in particular, is a traditional participant in the discussions that go on here. We in our energy club discuss opportunities for investing in the oil & gas sector that will become available in 2017. Our colleagues are interested in already existing projects in Russia and, of course, new initiatives. This is related mainly to the stabilization of prices on the oil market and expectations that it will grow.

Regarding OPEC’s historical deal to cut production, what are your expectations? Will the parties carry out their commitments in good conscience?

Yes. This is the first time OPEC members and non-members have reached a common understanding that something has to be done to stabilize prices on the market. I am sure that in the coming six months all countries will fulfill their obligations.

What are LUKOIL’s plans for 2017?

Our investments will be driven primarily toward stabilizing oil production in Russia, compensating for the drop we’re experiencing in Western Siberia with production in the Caspian Sea. We will also increase our production of hydrocarbons thanks to new gas projects coming online in Uzbekistan.

How cost-effective is offshore work these days?

Offshore projects require a lot of capital. A lot of it depends on tax legislation passed by countries that want to attract investors. Today it’s profitable to work with Norway. Unfortunately, it’s becoming less and less profitable to work in West Africa. Russia’s laws are attractive to investors. We’re becoming more active in the Caspian and Baltic seas. We’re waiting for the government to allow private companies access to the Arctic shelf.

What are the main risks you see to the global economy this year?

They are mostly financial in nature where Russia’s concerned. We have limitations due to financial sanctions. That’s why we’re anxiously awaiting a continued dialogue between Russia and the United States. We’re sure that relations that might develop in the future would give both Russian and American companies the chance to work closely together in Russia and on the global market.

Speaking of international markets, where are your priorities?

We’ve identified Iraq and Iran as priorities. We’re active in the Gulf of Mexico and in Mexico itself. We’re very interested in West Africa and the Norwegian shelf. And, of course, there’s Central Asia. These are expected to be our main investment destinations in the medium term.

What are LUKOIL’s plans for developing the West Qurna-2 project in Iraq? When do you plan to begin a new investment cycle?

We’ve already started a new cycle and I’d like to express my gratitude to the government of Iraq. It compensated our historical costs during a difficult time. Today we’re beginning to drill nearly another 60 wells to maintain production at 400–450 thousand barrels. We’re making decisions regarding maintaining those wells. But we’re also conducting negotiations with Iraq’s government regarding amendments to the contract, that is currently not favorable to investors.

Do you have some idea of what kind of conditions LUKOIL will face in Iran? Can you talk about any contract parameters or specific projects? When could a deal be signed?

We’ve been negotiating with the government of Iran for some time. We’ve focused on two oilfields: Al-Mansuri and Ab-Teymur. We’re ready to sign in about a month and a half, but they must pass a law on the oil industry. We hope they do this either before elections scheduled in May or immediately afterwards and that we’ll be able to sign contracts this year

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