MOSCOW (Reuters) - Russia’s second-largest oil producer Lukoil (LKOH.MM) expects its output to rise over the next 8-10 years as it brings new fields onstream, vice president and co-owner Leonid Fedun said on Wednesday.
Lukoil has suffered from sluggish production because its fields, located mostly in Western Siberia, are mature and depleted. But it has been focusing on growth in new producing regions, such as the Caspian Sea and Iraq.
“The three-year and ten-year company development plan is under deliberation. According to the parameters under consideration, Lukoil’s hydrocarbon production will be on the rise for the next 8-10 years,” Fedun told the Reuters Russia Investment Summit.
Fedun, among the first in the Russian oil industry to call for an output reduction deal with OPEC, said Lukoil had already yielded at least $1.5 billion in additional profits from the global oil pact that has lifted crude prices.
“My personal opinion is that the deal with OPEC will be extended and in general it will become, if not perpetual, for sure a long-term (deal), beyond 2018. It has such clear benefits for all participants that it would be weird to abandon it,” he said.
One of the output growth’s sources is Iraq and its giant West Qurna-2 oilfields, where Lukoil currently produces about 400,000 barrels per day (bpd).
It had initially planned to reach the production plateau of 1.6 million bpd, but the Iraqi government had cut it to 800,000 bpd as part of the global efforts to curb production to support weak oil prices.
Iraq has also asked foreign producers to cut spending on oil projects to reduce the cash-strapped government’s contribution in shared ventures.
Fedun said Lukoil has received the proposal from Baghdad to rein in output at West Qurna-2 and that the amount of compensation offered by the Iraqi government was unsatisfactory.
“We are discussing (the proposal), of course. There are financial issues as the financial compensation was not enough,” Fedun said, adding that Lukoil and Baghdad are in a “productive dialogue” to work out the new terms of the deal.
He also said that Lukoil’s new project in Iraq, known as Block 10, is another highly promising asset that potentially contains “hundreds of million of tonnes” of oil.
Lukoil, the last non-state oil company in Russia, also faces difficulties with efforts to team up with foreign companies to develop shale oil because of Western sanctions over Moscow’s role in the Ukraine crisis.
Fedun’s stake in Lukoil has also been a subject of scrutiny because of his active share trading. He said his current stake is 9.5 percent and he may transfer it to his children in future. There are no plans to raise or sell the stake, Fedun added.
“Lukoil is a long-term investment for me. My entire life — current and future — is connected with Lukoil, so I don’t plan to sell ... I have children who are quite active so I hope ... they will continue (my work),” he said.
Lukoil has said it wanted to sell its Litasco trading arm because of the sanctions. Fedun said some Western traders have eyed the purchase of Litasco but didn’t name them.
Asked about a possible hostile takeover, he said that the Kremlin does not want to monopolise the oil sector in “one pair of hands”.
Reporting by Olesya Astakhova and Oksana Kobzeva; Writing by Vladimir Soldatkin; Editing by Mark Potter and David Goodman