LUKOIL does not give up Taimyr

The company can resume drilling in 2019.
LUKOIL may continue drilling in the East Taimyr region, which in 2015 fought against the state-owned Rosneft. Plans do not look uniquely promising: the first well on the site turned out to be dry. But experts believe that the continuation of drilling is justified: the oil company now needs a growth in reserves in the Russian Federation, because its main assets are falling.

LUKOIL can start drilling the second well in the East Taimyrsky area in the first quarter of 2019, the head of the Ministry of Natural Resources Sergei Donskoi said on May 4. "They are now reinterpreting the data that they received during the drilling of the well," the official explained. The Ministry of Natural Resources told Kommersant that they "know about the company's intention" to continue drilling.

Oil resources within the land part of the East Taimyrsky area in D2 category as of January 1, 2009 were 4.5 million tons, gas - 9.3 billion cubic meters, condensate - 0.5 million tons. The area is 13.8 thousand square meters. km.

LUKOIL drilled the first well in the East Taimyr in 2017, not having received commercial oil reserves. As a result, the well was recognized as "dry", the company wrote off about 9 billion rubles because of this, recognized its vice-president Alexander Matytsin. About whether LUKOIL will continue to explore the site, it was not reported, although in general the company was intending to continue exploring the region. LUKOIL did not provide any comments.

Prospectivity of sites in the Khatanga area is still not obvious, but they have been the subject of fierce competition. So, East Taimyr originally included land and shelf parts (access to the shelf is only for state companies). Subsequently, only the land part was left from the site, but the receipt by Lukoil of even this region could indirectly become a reason for the company's claims to the shelf. The area claimed and Rosneft, after the victory of LUKOIL fought with him in court, but in the end the area remained for a private company.

Rosneft received a neighboring Khatanga site, where it began drilling along with LUKOIL and also received almost no inflows of oil. But the state company has put on balance the reserves of 81 million tons of oil (see "Kommersant" on October 16, 2017). Sources of Kommersant then noted that even these reserves are not sufficient for a cost-effective development of the discovery, although Rosneft CEO Igor Sechin reported to Vladimir Putin that the company is "on the verge of opening a very serious field." As Kommersant wrote, Rosneft's discovery of the deposit affects the boundaries of the unallocated subsoil fund sites, which the company asked to auction, but later abandoned the idea.

In an interview with Kommersant on December 26, 2017, Vagit Alekperov, the head and key owner of LUKOIL, admitted: "There are fewer and fewer companies in Russia, and assets that remain with them are getting worse and worse." At the same time, in March 2018, LUKOIL reported that a large part of its annual costs of $ 8 billion would go to production projects in the Russian Federation, mainly those already in operation. On mature assets until 2020, LUKOIL plans to reduce the decline in production in Western Siberia (the region accounts for half of the company's production) to 2-3% per year, and by 2027 it may stabilize production (see "Kommersant" on March 24) .

LUKOIL needs to look for future growth points in Russia, since the increase in production on greenfields, mainly in the Caspian, in the medium term will not be able to compensate for the decline in the main assets in Western Siberia, says Ekaterina Rodina of VTB Capital. In this situation, the drilling of a new well in Taimyr is justified, and it is premature to conclude that the sites are hopeless, she believes. According to the analyst, while the project does not bring significant financial losses, but in the implementation will require significant funds, including the capacity to transport oil.