Lukoil Board approves strategic development program
Posted: 22 November 2003
The Board of Directors of OAO LUKOIL convened in Geneva to approve
the Strategic Development Program of the Group for the period 2004-2013.
The program calls for a 2-2.5-fold increase of key financial indicators
and 1.8-fold increase of hydrocarbon production with capital expenditures
exceeding USD 25 bln.
LUKOIL’s strategy is aimed at significant increase of ROACE
through careful selection of investment projects and through cash
flow growth based on:
- Intensification of production at existing fields in the short
term and accelerated commissioning of new projects in Timan Pechora,
the Caspian and internationally;
- Gas program implementation;
- Maximum efficiency in marketing of crude oil and petroleum
products (cost reductions through improved logistics, and increase
of exports and sales through the Company’s filling station
network in the refining & marketing segment).
Management strategy of LUKOIL Group in 2004-2013 will focus on
greater incentives for top managers of business segments to improve
performance results, and development of an investment plan on a
project-by-project basis. Priorities in the period 2004-2006 will
be divestment of non-core assets, transfer to a tendering system
for purchases of commodities, materials, capital equipment and services,
reduction of the cost of borrowed capital, and creation of a reserve
fund for indemnification against sharp falls of oil prices and for
repurchase of the Company’s stock when market conditions are
favorable.
Key objectives for the exploration & production segment in
2004–2013 are as follows: to achieve minimum daily output
of 2.8 million barrels; to enhance field development efficiency
by application of tried-and-tested, state-of-the-art oil recovery
technologies; to reduce operating costs to USD 2.5/bbl and per unit
capex to USD 2.2/bbl in accordance with official macroeconomic forecast
figures and indices; to withdraw non-profitable and marginal properties;
to sell stakes in successful exploration projects after discovery
of commercial hydrocarbon reserves, including projects in the overseas
upstream projects sector; to acquire operating assets in the overseas
upstream projects sector during their production growth stage, including
via swaps for Russian oil assets; to expand and intensify oil and
gas production in new regions; to expand and diversify gas production.
In 2004-2006 the refining and marketing segment will focus on logistics
as a basis for reduction of transportation costs. There will be
an increase of export supplies via Russian ports and an increase
in deliveries to filling stations. Reduction of administrative and
selling costs in the international trade sector is also planned.
The focus in 2007-2013 will be on optimization of Russian refinery
capacity utilization, moderate investment in oil refining subsidiaries
and more intensive investment in petrochemical subsidiaries. There
will be an expansion of retail and an increase in the amount of
oil exported via independently owned transport. Existing refining
capacities will be enlarged and new refining capacities will be
acquired.
The Board of Directors also approved key indicators of the Company’s
financial plan, budget and investment program for 2004, assuming
Brent prices at USD22/bbl.
LUKOIL plans to add reserves of 120 million tons of oil equivalent
in 2004. The recoverable reserves replacement ratio is expected
to be 140 per cent.
The target for oil production in 2004 by subsidiaries and affiliates
(including PSA interests) is 84.9 million tons. Gas production is
targeted at 5.8 bcm.
Company refineries should refine 46 million tons of oil in 2004,
and the Company’s retail network (including franchising in
Russia) should sell 5.9 million tons of petroleum products.
Capital expenditures in 2004 are planned at USD 2.5 bln, of which
70 per cent will be spent on E&P projects.
The Board of Directors also reviewed implementation of the complex
program for optimization of field development and production (“the
Program”) in 2003-2005.
The aims of the Program are to improve efficiency of field work
at all development stages and to increase oil production. These
aims should be achieved through coordination of the development
process, accelerated oil field development, optimized fluid production
and water injection, and application of the most efficient and economical
technologies.
As stated in Company documents, Program implementation in 2003
enabled increase of average daily output by LUKOIL upstream subsidiaries
to 224,000 tons from 213,000 tons in the same period of the previous
year. There has also been a steady increase of average daily output
at wells accompanied by stabilization of the water cut and reduction
of the working well stock through closure of marginal wells. The
biggest growth of daily output was achieved at OOO Naryanmarneftegaz
and OOO LUKOIL-Komi.
LUKOIL is focused on expansion and strengthening of its reserve
base, and is the only Russian oil company which invests significant
resources in exploration in new regions of Russia. Mainly thanks
to the Company’s efforts a new oil and gas region has been
discovered in the Caspian, consisting of 5 large and highly productive
fields with recoverable reserves of 766 million tons of oil equivalent.
In the Timan Pechora oil and gas province LUKOIL has rapidly discovered
new recoverable reserves, justifying launch of commercial production
in that region. LUKOIL is significantly increasing investments in
exploration in the Nenets Autonomous District. This has enabled
increase of C1 and C2 reserves to 371.4 tons and 223.4 million tons
respectively.
According to preliminary estimates, incremental production in 2003
from use of enhanced recovery technologies will be 18.3 million
tons. Hydrodynamic methods will be widely applied in coming years
in addition to physical and chemical technologies for enhanced recovery.
Based on 2003 results the Company plans to close 1900 highly watered
wells, of which 1500 have already been shut down.
The Board of Directors decided to continue implementation of the
complex program for optimization of field development and production
in order to increase exploration efficiency, and reduce lifting
and production costs in accordance with the target figures.
For more information see www.lukoil.com.
Posted by Richard Price,
Editor Pipeline Magazine
Information supplied by companies
or PR agencies who are responsible for content. Send press releases
to info@pipelinedubai.com |
