MOSCOW (MRC) -- Lukoil, Russia's second-largest oil producer, plans to cut its capital spending because of economic and political volatility, said Upstreamonline, citing vice president Leonid Fedun.
Lukoil has not been directly affected by Western sanctions against Russia over its stance towards Ukraine but is suffering from a spike in international borrowing rates and the overall slowdown in Russia's economy, Reuters reported.
"I will recommend to my colleagues to cut the investment programme to accumulate more cash," Interfax quoted Fedun as saying. Fedun is one of two main Lukoil shareholders along with chief executive Vagit Alekperov.
Senior vice-president Alexander Matytsyn said the company aimed to cut capital expenditure by as much as USD2 billion starting from 2015.
In the first six months of the year, Lukoil's capex stood at USD7.7 billion, with around a quarter in overseas projects. Lukoil has the most foreign assets among Russian energy companies. It is leading the West Qurna-2 project in Iraq. The company said in a presentation on Friday that daily production at the project had reached 330,000 barrels per day. West Qurna-2's output is expected to peak at 1.2 million bpd from estimated recoverable reserves of about 13 billion barrels.
Input from the project boosted Lukoil's overall crude production in the second quarter by 7% to 2 million bpd. It posted second-quarter net profit of USD2.39 billion on Friday, up 14% year on year, on the back of rising oil prices.
As MRC informed before, Lukoil is set to drill deep for unconventional gas in Saudi Arabia's challenging "Empty Quarter" desert region early next year after a decade-long hunt for conventional deposits that has proved futile. Lukoil Overseas official said the joint venture will drill the first well in the first quarter of 2015 and the second during the last six months.
Lukoil is one of the world's biggest vertically integrated companies for production of crude oil & gas, and their refining into petroleum products and petrochemicals. The company is a leader on Russian and international markets in its core business, which accounts for over 20% of Russian oil production and 18% of the total Russian oil refining. Lukoil also controls two of the largest petrochemical plants in Russia and Ukraine: Stavrolen and Karpatneftekhim.
MRC