Workers at Lukoil’s Block 10 oilfield in Iraq. Last month Iran named 29 companies including Lukoil from more than a dozen countries that will be allowed to bid for oil and gas projects. Image Credit: Courtesy: Lukoil

Abu Dhabi: Russian oil giant Lukoil is targeting new projects in the UAE, Iran, Oman and Kuwait as it plans to expand its operations in the Middle East, the company’s vice president in the region Gati Al Jebouri told Gulf News in an interview.

The company is currently involved in two projects in Iraq including West Qurna-2 oilfield where the daily oil production is 400,000 barrels and in the exploration of Block 10 in Southern Iraq. The company also has projects in Egypt where the daily production in Lukoil’s share is about 6,000 barrels per day.

“Our desire and wish is to grow the business significantly in the Middle East, part of that growth comes from Iraq because we recently announced a successful discovery on the Block 10 and we will be carrying out further appraisal wells during 2017. We are investing in further drilling and in the future will be developing the field which will bring significant production.”

“In other parts of the Middle East, we are in active discussion with NIOC (National Iranian Oil Company) to develop two oilfields, Ab-Teymur and Mansuri, in Western Iran. We have proposed detailed plans of how we would develop those fields and are expecting to be awarded a contract. We are also looking at opportunities in Kuwait, Oman and the UAE.”

“In Abu Dhabi, the current licence extension on the onshore projects shows a clear wish by the authorities to invite a variety of international oil companies and we look forward to being able to participate in offshore license extension that will happen in 2018.”

Abu Dhabi National Oil Company (Adnoc) recently awarded 40-year contracts to six international oil companies including Total, BP, Inpex, GS Energy, CNPC (China National Petroleum Corporation) and CEFC China Energy Company to develop a number of onshore oilfields that account for the bulk of the UAE’s oil production of about three million barrels per day.

Adnoc will decide future partners for the offshore concession which expires in 2018.

Iran contract

On Iran, Al-Jebouri expressed optimism about signing the agreement once the terms of the contract are finalised.

“The final version of IPC (Iran Petroleum Contract) is yet to be approved. Once that it is done, we believe that the contract signing will commence which is expected to be in second half of this year or early 2018. We are very much hoping to reach agreement that would enable us to sign contracts.”

Iran, the third-largest producer within the Organisation of the Petroleum Exporting Countries (Opec), has been seeking to increase its oil output and attract foreign investment since the lifting of international sanctions last year.

Last month Iran named 29 companies including Lukoil from more than a dozen countries that will be allowed to bid for oil and gas projects using the IPC model, that offers sweeter terms for the development of the oil projects.

Iraq operations

Speaking on West Qurna-2 oilfield in Iraq, Al-Jebouri said they are looking at different ways of developing the project and increase oil production to 1.2 million barrels per day from the current levels of 400,000 barrels per day.

The company entered into a 25-year contract with the Iraqi government to develop the project in 2010 and invested close to $7 billion (Dh25.6 billion) to build facilities including pipelines, power stations, accommodation for workers and drill necessary wells to develop the project. The entire amount was repaid by the Iraqi government, he said.

“Going forward, we are in discussions with Iraqi authorities on how we can develop the second phase of West Qurna-2 and depending on those discussions we will determine how much investment is necessary to reach 1.2 million barrels per day of production.”

Global crude production

The total hydrocarbon production of Lukoil globally has reached 2.2 million barrels per day in 2016 with the Middle East accounting for five per cent of the total production, he said.

Lukoil is one of the world’s largest vertically integrated public oil and gas companies, it accounts for over 2 per cent of global crude oil production and around 1 per cent of the world’s proved hydrocarbon reserves.

When asked whether they are happy with the current oil prices, he said they are always with the oil prices that enable them to invest in the development of the projects and the current level is close to the levels which is acceptable to consumers and also sufficient for investors to invest.

“We would like to see higher prices in future but we want to see prices going up in a way that would enable the stable development of the oil and gas industry and also that supports the economic growth.”

Global benchmark, Brent is currently trading at around $56 per barrel.

Oil price of $55 and $65 per barrel

“I believe that the current market conditions will be less volatile than we saw two or three years ago where we’ve seen dramatic falls and rises in prices over a relatively short period of time. We will see prices varying between $55 and $65 mark this year and next year.”

On the continuation of Opec cuts to stabilise oil prices beyond May, he said it would be appropriate and logical for the cuts to be maintained for another six months.

The company has not received a requested to cut production in compliance with the Opec agreement in Iraq.