Lukoil plans $100bn spend in 10yr expansion projectPublished: Thursday, 7 September, 2006, 12:22 PM Doha Time

While the $10bn-per-year spending plan pushes Lukoil into the league of the world’s largest oil companies, it’s still only half the $20bn ExxonMobil Corp wants to invest annually through 2010. Lukoil is stepping up expansion outside Russia as the government raises taxes on crude output and exports

MOSCOW/SINGAPORE: Lukoil, Russia’s biggest oil producer, will spend $100bn over 10 years to double output and invest in refineries abroad, as President Vladimir Putin tightens state control of the industry at home.
The company, which produces 2.2% of the world’s oil, will spend 35% of the money on refining and marketing, spokesman Dmitry Dolgov said yesterday in Moscow.
Lukoil’s overseas expansion plans include buying and building refineries in the US, Turkey, Kazakhstan and the Netherlands, Valery Golovushkin, a Lukoil vice president, said earlier yesterday in Singapore.
Lukoil is stepping up expansion outside Russia as the government raises taxes on crude output and exports and increases its presence in the industry. While the $10bn-per-year spending plan pushes Lukoil into the league of the world’s largest oil companies, it’s still only half the $20bn Exxon Mobil Corp wants to invest annually through 2010.
“It’s a really ambitious investment programme. Strategically, it’s the right thing, but it’s a hefty price tag and I’m not sure how they’ll finance it,’’ said Jeffrey Woodruff, an energy analyst with Fitch Ratings in Moscow. “It’s clear the money won’t come from our profits,’’ said Dolgov. “Of course, we’ll use mechanisms available on the financial markets.’’
The company says it will disclose details at a meeting for investors in New York on October 18. Lukoil, which is 18% owned by ConocoPhillips, has a chain of filling stations in the US.
Lukoil is interested in buying a 20% stake in Motor Oil Hellas SA, Greece’s second-biggest refiner, the Greek website Euro2day reported yesterday. Motor Oil chief financial officer Petros Tzannetakis told Bloomberg News no deal had been made. Dolgov declined to comment.
Lukoil already has refineries in Bulgaria, Romania and Ukraine. It can tap into a total reserve base of 19.7bn barrels of oil equivalent, close to Exxon’s 21.6bn barrels.
“We have the reserves and the production’’ to help Russia boost supplies to Asia, Golovushkin said at the 22nd Asia-Pacific Petroleum Conference in Singapore yesterday. “The main problem we’re facing is logistics.’’
Pipeline and shipping bottlenecks are forcing Russian oil companies including Lukoil to ship more oil to Asia and Europe by rail and ship, which is costly and inefficient. A planned eastern pipeline, which may be completed in five to seven years, will take as much as 80mn tonnes of crude oil a year, or a third of current Russian exports, to the Far East, Golovushkin said.
The company believes crude will fetch a higher price in Asia than in Europe, he said.
In December, Lukoil agreed to buy Nelson Resources Ltd, which pumps oil in Kazakhstan, for $2bn. It was the largest-ever overseas acquisition by a Russian company.
The company has said it may consider buying the regional retail networks of Yukos Oil Co if the bankrupt company’s assets are auctioned.
Lukoil is also looking to restart its involvement at Iraq’s vast West Qurna field.
Lukoil hopes to announce new investments in Asia before the end of this year, Golovushkin said.
The investments include upstream and downstream projects in countries such as South Korea, Vietnam, Singapore and China said Valery Golovushkin, Vice-President of trading and supply.
“We are ready to invest in this region and to invest a lot. We are looking for good projects and have been in discussions with some parties in the region,” he told an energy conference. He later told reporters: “I cannot reveal any details now but some announcements should be made in two to three months’ time.”
Responding to questions, Golovushkin said Lukoil, Russia’s largest oil producer, was looking to invest in an oil storage facility in Singapore, adding that logistics are an important part of the oil infrastructure.
Industry sources told Reuters that the Russian firm’s top management had been in discussions with senior officials of Emirates National Oil Co, the majority stakeholder of Horizon Terminals, which will open its new Singapore facility by the end of the year. – Agencies