First oil flows from Yuri Korchagin

New dawn: over the Caspian Sea

Russian producer Lukoil today brought the Yuri Korchagin field, in the Caspian Sea, on stream, and urged the government to consider easing laws on offshore investment.



Company head Vagit Alekperov said his company had spent nearly 15 years and more than 40 billion roubles ($1.36 billion) bringing Korchagin into production and that oil players needed assurances that future investments will bear fruit.

"We must reinforce exploration work and perhaps introduce some adjustments to legislation that would attract additional investment, not only to onshore fields but to the Russian seabed," Reuters quoted Alekperov telling reporters on the Caspian oil platform.

"Fifteen years is a long time and we must provide stability for Russian industrial activity."

Russia, the only country in the world pumping in excess of 10 million barrels of oil per day, faces a challenge in developing complex and remote fields to replace maturing deposits in western Siberia and prevent output from stagnating.

The Igor Korchagin field, with estimated reserves of 570 million barrels of oil equivalent, is expected to produce 2.5 million tonnes of crude per year (about 50,000 bpd) at peak production in 2011 and 2012, or about 2.5% of Lukoil's total crude output.

This year, the field is expected to produce 343,000 tonnes.

Korchagin is only the first of six deposits owned by Lukoil in the northern sector of the Caspian Sea. The platform is located about 180 kilometres from the city of Astrakhan on the Volga river delta.

The company plans to launch the largest of its Caspian deposits, the Vladimir Filanovsky field, in 2015. Annual output there is expected to reach 10.5 million tonnes.

Lukoil has said investment in all six Caspian fields - which have total estimated reserves of 4.7 billion barrels of oil equivalent - would reach about $12 billion.

Oleg Maximov, Troika Dialog oil and gas analyst, said Lukoil should pursue the government for tax breaks in the Caspian such as those secured by its closest peer, state-run Rosneft, for its large Vankor field in eastern Siberia.

Vankor, already a supplier of crude to Asia, is among the 22 eastern Siberian fields to have secured a zero export duty.

"Under the current tax system, the company has received very little for the large volumes of investment required to bring the project into production," Maximov told Reuters. "Rosneft is agreeing something, and Lukoil also needs to do this."

Alekperov said Lukoil's experience in the Caspian Sea, as well as the launch of its Varandei oil terminal in the Arctic in 2008 had equipped the company well for offshore oil projects.

"We are prepared for offshore projects in Russia and abroad," he said.

Oil from the Korchagin field will be supplied to Makhachkala, capital of the Russian republic of Dagestan. From Filanovsky and other fields, crude will move to the Caspian Pipeline Consortium (CPC), in which Lukoil is a shareholder.

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