Russia's Lukoil has retained significant spare oil production capacity despite pressure from the Kremlin to keep output in check to comply with Opec+ quotas and growing concerns that more stringent environmental standards in Europe could lead to a drop in demand.
The private player said on Wednesday that it can quickly grow oil output by at least 180,000 barrels per day — mostly at its mature oilfields in West Siberia — once external restrictions are removed.
Its oil and condensate production fell by 9% to 1.65 million bpd last year as it followed guidelines to cut output in the second and third quarters, Lukoil revealed on Wednesday.
However, in the fourth quarter of 2020, the company’s oil and condensate production grew slightly to 1.57 million bpd compared with the third quarter.
The output cut mainly affected its mature projects, with traditional and unconventional greenfields maintaining growth in 2020.
According to Lukoil vice president Azat Shamsuarov, the company expects to start commercial oil production at the Grayfera offshore field in the Russian sector of the Caspian Sea in 2022.
Grayfera would be Lukoil’s third asset to start producuing within its large Caspian licence block, with plateau output of over 24,000 bpd of oil and condensate.
Two fields in the block already in development — Filanovskogo and Korchagina — produced at the rate of 176,000 bpd last year, almost unchanged from 2019.
Shamsuarov said that the company has completed front-end engineering design studies and obtained all necessary approvals for its planned production platform on its D-33 block in the Baltic Sea near the Russian enclave of Kaliningrad.
Lukoil is targeting a final investment decision on this greenfield project in 2023 and expects plateau oil production of over 30,000 bpd at the deposit, he said.
The company also managed to grow output at its unconventional projects in Russia that include high viscosity oil in the north and oil in low permeability reservoirs in West Siberia.
Total production at these projects jumped by 16% to a total of 146,000 bpd last year compared with 2019, the company said.
Significant efforts to control and cut costs at all levels and a reduction in its investment programme were implemented last year.
That allowed Lukoil to remain in profit, reporting net income of just over 15 billion roubles ($205 million) last year against 640 billion roubles in 2019 despite a 28% annual decline in gross revenues to 5.6 trillion roubles.
Lukoil executives remain optimistic on the company’s operating performance this year, and expect its oil and condensate production to grow by 2%.
Expectations for gas production are higher, with the company forecasting 10% growth this year following a quick rebound of output at its two gas greenfields in Uzbekistan.
According to Shamsuarov, onshore fields under the company’s control in Russia have unused annual gas production capacity of about 20 billion cubic metres, while its Caspian deposits may add another 15 Bcm of possible annual capacity.
Last year, Lukoil produced 29 Bcm of gas against 35 Bcm in 2019, it said.