“We already have a giant field” in Iraq, Vice President Leonid Fedun said.
“It is a giant challenge to develop that kind of field, and it will effectively double LUKOIL’s output. We produce about 95 million tons, and we’ll produce 90 million there.”
“West Qurna-1 is interesting to us, but we wouldn’t be capable of effectively investing in it and operating it at the moment.”
ExxonMobil, with Royal Dutch Shell, clinched a 20-year deal in 2009 to develop West Qurna-1, an 8.7-billion-barrel field in southern Iraq, beating out Russian, French and Chinese rivals.
Earlier this month, however, ExxonMobil signed oil and gas exploration deals with Kurdistan, prompting Baghdad to warn that the US major could be jeopardizing its future in the country.
Baker Hughes International will carry out production drilling and well development in the Mishrif formation of West Qurna-2 for LUKOIL.
“We’ve signed all servicing contracts ... in the next two weeks the Iraqi Oil Ministry will approve these contracts and we will start working immediately,” Fedun said.
At another of its most promising foreign projects, an exploration venture in Ghana, two of five wells have yielded problematic results.
Nonetheless, Fedun said LUKOIL would persevere.
“You can’t judge by the five wells we’ve drilled. It is definitely worth continuing operations there,” he said.
LUKOIL has set aside $1.8 billion to finance acquisitions, according to its quarterly financial report. It has not disclosed where it wants to invest that amount.
Fedun said the company, which relies on foreign assets to ensure production growth, is still looking at unconventional resources in the US.
“We looked and are looking at these assets including in North America, but the expectations of the owners of these resources are too high for us to invest now, since the return on these operations is low,” he said.
LUKOIL, which has shifted a once-bullish stance on refining, is not interested in acquiring US refinery Valero, nor is it looking to expand its refining capacity in Western Europe, where it has stakes in Italian refiner ERG and in Total’s Dutch refinery, Fedun said.
He said the company, founded 20 years ago, is poised to make a share placement in Hong Kong in 2013.
“This will be an impetus for our company development. We’ll see, how much we will place ... up from $1 billion, conditionally speaking,” Fedun said.
LUKOIL has been the only Russian oil major with declining output, mainly due to its heavy exposure to moribund West Siberia assets. Its output fell 1 percent last year to 96 million tons (1.92 million barrels per day).
The company expects to achieve modest growth next year and described its expected output increase in 2013-2014 as “material” on the back of foreign expansion and new domestic projects.
Apart from oil in Iraq, LUKOIL is developing gas projects in Uzbekistan and is set to launch its Filanovsky field in the Caspian Sea, with estimated oil reserves over 150 million tons.
Fedun said t the company is aiming to pay at least 15 percent of its net income in dividends, adding that some market projections for a 25 percent payout were too optimistic.
LUKOIL also forecast that the world’s oil price would average $112 per barrel next year and at $119 in 2016.
