UPDATE 2-LUKOIL says proved '08 reserves fall, replaces output

Fri Mar 6, 2009 11:30am EST

Related Topics

* LUKOIL '08 reserves fall on back of low oil price

* Replaces annual production with new reserves

(Recasts, analyst comment, share price, background)

By Robin Paxton and Amie Ferris-Rotman

MOSCOW, March 6 (Reuters) - LUKOIL (LKOH.MM) said on Friday proved hydrocarbon reserves fell to 19.3 billion barrels of oil equivalent (boe) in 2008, but Russia's No. 2 oil producer more than replaced its annual production with new reserves.

Over 1 billion boe of LUKOIL's reserves were reclassified as the oil price slumped last year, while other leading reserves holders U.S. major ExxonMobil XON.M and Russian giant Rosneft (ROSN.MM) boosted reserves in 2008 using the same methodology.

LUKOIL said in a statement its proved hydrocarbon reserves as of Jan. 1, 2009 included 14.5 billion barrels of oil and 29.3 trillion cubic feet of gas. Total hydrocarbon reserves fell from 20.4 billion boe a year earlier.

LUKOIL, in which U.S. major ConocoPhillips (COP.N) has a 20 percent stake, said it recorded an 875 million boe increment in proved reserves last year, equivalent to 107 percent of annual production.

The increase comprised 601 million boe from geological exploration and production drilling and 274 million boe from acquisitions, including the major $758 million purchase of a gas project in Uzbekistan.

Oil and gas companies are generally expected to replace more than 100 percent of their annual production as a sign of growth, according to industry analysts.

The evaluation was in compliance with PRMS (Petroleum Resources Management System) requirements, previously called SPE.

The system is viewed as less stringent than others, such as the U.S. Securities and Exchange Commission's (SEC) methodology, by which Rosneft and the third-largest Russian oil firm TNK-BP TNBPI.RTS reported falls in 2008.

LUKOIL said a drop in the Urals oil price to $34.8 per barrel as of Dec. 31, 2008 from $93.7 per barrel a year earlier affected the economic feasibility of a portion of the company's reserves, and resulted in a transfer of reserves into "other categories".

"It seems that the quality of LUKOIL's reserves worsened, so the firm posted a drop," analyst Valery Nesterov at Troika Dialog told Reuters.

LUKOIL said it expects to transfer the reclassified reserves back to the proved category if the oil price makes a recovery.

At 1448 GMT, LUKOIL's shares were trading up 3.22 percent at 1,204 roubles ($33.56) in Moscow, and up 3.37 percent in London.

MORE STRICT METHODOLOGY

State-controlled Rosneft (ROSN.MM) said on Monday its oil and gas reserves rose to 22.307 billion boe last year from 21.669 billion in 2007 under the PRMS methodology.

Under the more strict SEC, Rosneft's reserves fell by 0.3 percent.

LUKOIL did not measure its reserves using SEC.

TNK-BP TNBPI.RTS replaced 82 percent of its reserves by SEC standards, the first time in six years Russia's No. 3 oil company failed to fully replace reserves.

Its total preserved reserves fell to 8.112 billion boe on the SEC's life-of-field (LOF) basis, from 8.225 billion barrels in 2007.

At the end of 2008 the world's largest energy firm ExxonMobil's proved reserves base increased to 22.8 billion of boe, split approximately evenly between liquids and gas. (Additional reporting by Katya Golubkova; editing by Sue Thomas)

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