Wednesday, 03 August 2011 09:52

Lukoil sets its sights on West Africa

A Russian oil and gas company, Lukoil, is looking for growth outside its borders and has set its sights on West Africa. On 20 July the company announced that it had acquired a 45% stake in deepwater Block SL-5-11 offshore Sierra Leone from the private Nigerian explorer Oranto Petroleum, adding to its acreage in Ghana and Côte d’Ivoire.

According to Business Monitor International (BMI), they see Lukoil’s push to expand offshore West Africa around the Gulf of Guinea as a positive move that provides strong reserves and production-growth potential.

Lukoil is cutting capital expenditure (capex) in Russia, where its investments have been hit by an increasingly punitive tax environment, and is looking abroad for growth opportunities. Plans to spend US$900-million in the region over 2011–2012 are already in place. This figure is likely to rise as Lukoil expands its hunt into Sierra Leone. According to the arrangement, Lukoil and Oranto have to drill their first exploration well before 2013.

Black Gold Coast
Lukoil has not broken down its spending plans and is spending a lot on its Ghana acreage. The company is confident that it will discover the 150- to 250-million barrels (bbl) needed to justify commercial development.

Lukoil’s partner in Ghana and Côte d’Ivoire, Vanco, set out an ambitious five-well Gulf of Guinea drilling programme in 2010. The partners plan to drill four wells at the deepwater Cape Three Points Block, including two exploration wells and two appraisal wells at the Dzata prospect, where two discoveries were made in February 2010. The plans for Côte d’Ivoire are less ambitious. Just one well is lined up for Block CI-401 in Q112.

The reason why Lukoil is considering its West Africa exploration programme is to facilitate its declining reserves trend. The company’s proven reserves have fallen by about 15% from 20.3-billion barrels of oil equivalent (boe) in 2005 to 17.25-billion boe in 2010.

With reserves of just 115-million boe, Lukoil’s international portfolio accounts for a fraction of its overall reserves, but the company clearly sees growth outside Russia as crucial to reverse the downward trend.

“Lukoil’s offshore West Africa push is a positive move that promises strong reserves and production-growth potential. International upstream capex has seadily raised to more than 25% of the total in 2010.” – Business Monitor International

For more information, visit www.oilandgasinsight.com, to which full acknowledgement and thanks are given.

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