Lukoil to Invest $48 Billion in Next Three Years to Boost Output
OAO Lukoil, Russia’s second-largest oil producer, plans to invest $48 billion in 2012-2014 as it seeks to revive oil and gas production growth.
The company will spend over 70 percent of the $13.9 billion earmarked for spending next year on production to halt declines at West Siberian units and ramp up the West Qurna-2 project in Iraq, Vagit Alekperov, Lukoil’s billionaire chief executive officer, told reporters today in Moscow.
Oil and gas output will rise at an average of 3.5 percent a year over the next 10 years, Moscow-based Lukoil said today in a statement after the board approved its strategy through 2021. Increased output will not come at the expense of dividends, according to the Lukoil boss.
“The company has always been oriented toward investment but dividend growth may be significant,” Alekperov said without disclosing numbers.
Lukoil has built up a record $7.7 billion in free cash in the first nine months of the year according to its third-quarter financial results and aims to reverse a slump in production. Total output fell 5.3 percent to 2.11 million barrels a day in the third quarter, with oil down to 1.82 million barrels a day, and gas falling to 284,000 barrels of oil equivalent a day.
Lukoil is “absolutely right” to boost drilling now, Artem Konchin, an oil and gas analyst at UniCredit SpA, said today by e-mail. “They were correctly preserving capital during the last few years due to low yields on upstream investments in Russia.”
Lower Export Duties
The explorer will take advantage of larger profit margins allowed by the Russian state after it lowered export duties on crude shipments in October, Konchin said.
Lukoil aims to start projects in the Caspian Sea and Uzbekistan and use enhanced oil recovery techniques to build total output to 160 million metric tons a year (3.21 million barrels a day) within 10 years, Alekperov said. Oil output will constitute up to 110 million tons of that figure, he said.
Oil output within Russia will stabilize at 90.7 million tons next year and grow to over 101 million tons in 2017, he said.
The mid-term plan is based on a projection of Brent oil prices of $96.20 a barrel in 2012 to $108.60 in 2014, according to the statement.
Investments in refining will increase gasoline output from Russian refineries by almost 50 percent to 9.5 million tons a year by 2021 and reduce by over 2.5 times the volume of heavy, or residual, products produced at plants, Lukoil said in the statement.
To contact the reporter on this story: Stephen Bierman in Moscow at sbierman1@bloomberg.net
To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net
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