Lukoil signed an agreement with oil company BP to acquire 25% in the SWAP (Shallow Water Absheron Peninsula) exploration project in the Azerbaijani sector of the Caspian Sea, the Russian company said on September 29. The transaction is expected to be closed by the end of 2021 after receiving the approval of the Azerbaijani government, its amount has not been disclosed. BP will remain the operator of the project with a 25% stake. The third participant is the Azerbaijani state oil and gas company Socar with a 50% share.
The head of Lukoil Vagit Alekperov, whose words are quoted in the release, noted that the scientific and technical potential of the partners will give an additional impetus to the development of a potentially promising area in the shallow waters of the Caspian Sea.
At present, Lukoil is the largest subsoil user in the Russian sector of the Caspian Sea (the largest fields are named after Filanovsky, named after Korchagin, named after Greifer). In total, the company discovered nine fields in this region with total recoverable reserves of 7 billion barrels. oil equivalent. It also has joint projects in the Caspian with Rosneft, Gazprom and Kazakhstan’s Kazmunaigas.
Lukoil has been working in Azerbaijan since 1994, when it entered the project for oil production at the Azeri-Chirag-Guneshli field (withdrew from the project in 2003). Now the company has 10% in the development of the largest offshore gas condensate field in Azerbaijan, Shah Deniz, whose reserves are estimated at 1.2 trillion cubic meters. m of gas and 240 million tons of gas condensate (operator – BP). Since 1995, Lukoil has also had its own filling station network in Azerbaijan. In March 2019, Alekperov announced his interest in the Absheron gas project (reserves were estimated at 350 billion cubic meters of gas), and in January 2020, the press service of Azerbaijani President Ilham Aliyev announced the planned participation of a Russian company in the development of Nakhchivan fields. and Goshadash with total forecasted reserves of 110 million tons of oil and 85 billion cubic meters. m of gas. The fate of these plans was not reported.
Senior analyst at Alfa-Bank Nikita Blokhin notes that joining a new project in Azerbaijan will allow Lukoil to gain access to BP’s offshore technologies. Although SWAP is located in a relatively shallow area, the reservoir itself may lie at a depth of 3000-5000 m, which is of interest from the point of view of increasing the company’s global expertise, the analyst said. The project is in its early stages of development, but Lukoil is interested in deepening cooperation with BP and Socar in Azerbaijan, which accounts for almost 10% of all production of the Russian company abroad, Blokhin added.
In 2020, Lukoil reduced oil production by 10% – to 77.2 million tons, including 3.75 million tons on foreign projects. In general, international projects, according to the company itself, last year accounted for about 8% of the oil produced.
Aleksey Belogoryev, deputy director of the Institute of Energy and Finance, notes that Lukoil’s production volumes would not have shown significant positive dynamics even without taking into account the impact of the OPEC + deal to reduce production. “This is especially true for the traditional oil-bearing regions of the company, such as Western Siberia. In the absence of prospects for building up the resource base here, Lukoil is forced to look for growth points abroad, ”the expert says. The Caspian shelf is one of the areas actively developed by the company, therefore, synergy with projects in the Russian part of the Caspian Sea is possible, Belogoryev believes.
Lukoil has few opportunities for growth and renewal of the resource base within Russia, and the Caspian region is familiar to it, adds Dmitry Marinchenko, director of the group for natural resources and commodities at Fitch. In Blokhin’s opinion, in this case it is impossible to talk about compensation for the decline in production in the regions characteristic of the company. As part of its long-term strategy, Lukoil seeks to stabilize production in Russia, while considering promising growth projects abroad, ”he notes. Blokhin adds that projects in the Caspian Sea, in particular, the Filanovsky and them. Korchagin, are Lukoil’s flagship production projects with preferential conditions for the payment of mineral extraction tax and export duties, which also presupposes the further development of the Russian part of the Caspian shelf with high profitability.
Lukoil did not provide additional comments to Vedomosti, BP and Socar did not respond.
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