Russia's top oil producer Lukoil is recovering after a dip in production caused by the Covid-19 pandemic and restrictions on its output imposed by the Kremlin following its agreement with members of Opec+ alliance.

Speaking at a conference call earlier on Wednesday, Lukoil vice president Pavel Zhdanov said the company has recovered output of 270,000 barrels of oil per day out of the total 310,000 bpd of production that it lost last year at its Russian assets.

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Zdanov said the company expects to use up remaining spare production capacity of about 30,000 bpd by boosting development drilling at its fields in the country.

Caspian greenfield

Next year, Lukoil also expects first oil to flow from the Grayfera offshore field in the Russian sector of the Caspian Sea, which will be the third field to be commissioned by the company within its large licence block there.

A production platform and a separate living quarters module for the Grayfera field have reached 84% and 90% completion at Russian yards near the city of Astrakhan, the company stated, with the tow-out and installation in the Caspian Sea scheduled for the second quarter of 2022.

Lukoil is also hoping for Russian authorities to restore tax concessions for its heavy-viscous oil projects in the north of the country early next year, following policy statements in this direction.

Previous tax concessions were suddenly scrapped last year as authorities sought more revenues from the oil sector to plug a budget deficit.

Lukoil has had to considerably reduce investments into heavy-viscous oil developments, however, it has been able to maintain production at them almost unchanged at about 95,000 bpd.

Preliminary indications are that tax concessions may become effective only in 2024, but Lukoil is still waiting for confirmation.

The company said its oil and condensate production in Russia and from international projects, excluding West Qurna 2 concession in Iraq, remained almost unchanged at 1.61 million bpd in the between January and September this year, compared with 2020.

Gas renaissance

Lukoil's natural and bypass gas production rose by 13% to almost 24 billion cubic metres in this three-month period, compared with 2020, mainly as a result of the better performance of its gas fields in Uzbekistan.

According to Zhdanov, the company now expects gas output in Uzbekistan to top 14 Bcm for the whole of 2021, thus returning to the pre-pandemic level.

An improving market environment pushed Lukoil’s revenues up by 62% to 6.67 trillion roubles ($92.6 billion) in the first nine months of this year, compared with the same period of 2020.

The producer also posted net income of 540 billion roubles between January and September this year against the loss of 14 billion roubles last year.