Lukoil, the Russian oil company, will invest $480 million in
Uzbek natural gas fields this year as it moves to expand
production from non-Russian assets.
The commitment was included in a programme of joint economic
activity agreed last month between Russia and Uzbekistan and
announced by Russian deputy prime minister Sergei Ivanov.
Grigorii Volchek, spokesman for Lukoil Overseas Holding, the
subsidiary that manages activity in Uzbekistan, said this
weekend that the bulk of the investment will go into the
Kandym-Khazak-Shady project, which is now producing 3 billion
cubic metres (bcm) of gas per year.
Kandym-Khauzak-Shady, which started production in 2007,
produced 2.34 bcm in 2008, more than half of the marketable gas
produced outside Russia by Lukoil.
Lukoils other major operations in Uzbekistan are at
the South West Gissar field in Ustyurt, and in the Aral area,
where exploration work is underway.
It will be another five years before
Kandym-Khauzak-Shady reaches its maximum projected output
level, Volchek told Emerging Markets. Much of
the new resources will be spent on drilling wells and
completing a gas processing plant at the field.
Volchek added that while the company had cut back long-term
investments in 2009, as a result of the oil price dip and the
economic crisis, producing fields in Uzbekistan had
scarcely been affected.
The background to the expansion of Lukoils foreign
investments is the continuing tug-of-war between the Russian
government and oil companies over the level of taxation on
production at home.
Newly-developed fields in east Siberia, the largest of which
is worked by the state-owned oil flagship Rosneft, have been
exempted from all taxes, until at least the end of this
Russian prime minister Vladimir Putin and Lukoil CEO Vagit
Alekperov last week attended a ceremony to mark first oil being
pumped from Lukoils operations in the Russian sector of
the Caspian sea, and said that the government will also
consider scaling back export duties there.
Lukoils Caspian fields Korchagin, Filanovsky
and some smaller deposits have already been partially
exempted from Russias other key tax, the mineral
resources extraction tax.
Chirvani Abdoullaev, a Moscow-based oil analyst, said that
investing more heavily in fields outside Russia is logical from
Lukoils standpoint. The opportunities for Lukoil to
grow in Russia are limited. Putin mentioned this issue in his
speech at the North Caspian field.
In the absence of opportunities at home, Lukoil is
looking for opportunities not only in Uzbekistan, but also in
Iran, Iraq and west Africa.
For the Russian oil companies, a further incentive to invest
in central Asian gas is that the gas they produce in Russia can
only be sold into the domestic market, as Gazprom has an export
monopoly. Oil companies have also previously had difficulties
gaining access to Russias gas transport infrastructure,
also a Gazprom monopoly although this is now
Abdoullaev said Lukoils investment in non-Russian
fields is not back to the level of 2008, but is 10-15% up