Dr Vagit Alekperov, President, LUKOIL, speaks about operations across central Asia, the Middle East and the Caspian region as well as the continued importance of oil and gas in the worldwide energy mix
What are the latest developments for Iraq’s West Qurna-2 oilfield and have the tenders for construction and engineering contracts been approved?
We are currently working on the second phase of the West Qurna-2 project, that was launched in April 2018. Back then, LUKOIL and Basra Oil Company signed a Final Development Plan for West Qurna-2 oil fi eld that provides for an oil production plateau of 800,000 barrels per day. According to the plan, the oil production of 480,000 barrels per day will be reached in 2020 and 800,000 barrels per day is expected in 2025. These indicators will be achieved as a result of drilling and commissioning of new production and injection wells, construction and launching of oil treatment, storage and transportation facilities and facilities for gas treatment and power generation. Some tenders for the second phase of West Qurna-2 are under way, others are at the preparation stage.
How much is the Middle East a focus for LUKOIL’s operations?
The Middle East is one of the central crossings for the global energy industry. Holding the largest oil and gas reserves, it plays a crucial role in meeting global energy demand. Obviously, most IOCs consider this region as one of the main areas for new investments. LUKOIL, holds 16 billion boe of hydrocarbon reserves, focuses primarily on the organic growth of its business. It means efficient development of existing reserves in Russia and abroad, particularly in the Middle East. As for the new projects in this and other regions, we will seriously consider all opportunities that match our performance criteria. Besides, overseas projects are a very good opportunity to build strategic partnerships with other IOCs. For example, in Iraq we work closely with Inpex, while in Mexico with Eni. We are open for future collaboration.
What are the latest developments in the Rakushechnoye project in the Caspian Sea?
The Rakushechnoye field is the third project scheduled by LUKOIL for development in the Caspian region. The first two are V. Filanovsky fi eld and Yu. Korchagin fi eld that are already commissioned and producing oil. LUKOIL took a final investment decision on the Rakushechnoye fi eld’s development in July 2018. The commercial production is scheduled to start in 2023. The expected oil production plateau is 1.2 million tons per year. Close proximity to the company’s producing fields in the Caspian Sea made it possible to significantly optimise the fi eld development project through the use of the existing infrastructure for treatment and transportation of products along with the power supply at the Rakushechnoye fi eld. The Rakushechnoye fi eld output will be supplied for treatment to the central technological platform at the V. Filanovsky fi eld and then exported.
What was the reason behind the recent large investment in operations in Uzbekistan?
Our company is the largest foreign investor in the Republic of Uzbekistan. LUKOIL has been successfully implementing two major gas projects there. The first is Gissar that has recently reached its planned production capacity of 5 billion cubic meters per year. The second project is Kandym-KhauzakShady that is going to reach planned capacity in the nearest future. Peak production will exceed 11 billion cubic meters per year here. Gas from the Uzbekistan projects is mainly sold to China under an inter-governmental agreement, which has a positive impact on the economics of the projects.
The Kandym Gas Processing Complex became one of the largest facilities of its kind in Central Asia. It was commissioned within only two years, eight months ahead of schedule. Thus, LUKOIL has proved its ability to efficiently develop large-scale projects. The main reason behind these investments is to build a strong base for gas production within the company that allows LUKOIL to generate significant free cash flows regardless of oil price fluctuations.
How do you see the long-term future for the oil business across the globe?
We expect that the global demand for energy will continue to grow due to the increasing world population and GDP. In the next 20 years the share of crude oil in the global energy balance will probably decrease due to a higher demand for natural gas and renewables. However, consumption of crude oil will increase. We keep an eye on the development of electric vehicles. Even in the most optimistic scenario, it will take long time for EV to reach critical market share. Therefore, we are not expecting peak oil demand (that is a very popular concept today) before 2035. We also should not forget about the petrochemical industry that will grow steadily due to increasing demand for its products in Asia and in the Middle East.
How important is ADIPEC to the company?
LUKOIL is proud to be a part of ADIPEC as a significant and influential event, bringing together major stakeholders in the global energy industry. This is an excellent opportunity to observe the latest industry trends, meet partners from all over the world and exchange valuable and progressive ideas. This year LUKOIL steps forward as a Platinum Sponsor of ADIPEC. It gives us an excellent opportunity to further promote the LUKOIL brand to a global market and introduce the company’s updated strategy to major stakeholders.