M. Stulov

Back in 2006, Lukoil expected to break into the top ten largest companies in the world in 10 years, increasing its total hydrocarbon production to 210 million tons of conventional fuel, and its capitalization to $150–200 billion. At the time, the company’s production was growing. At the end of 2009, Lukoil adopted a new 10-year strategy, focusing on increasing cash flow rather than production. And then oil production began to fall: new projects did not compensate for the reduction in production in the main region, Western Siberia.

Lukoil

Russia's second largest oil company by production. Major shareholders (as of the end of 2010): President Vagit Alekperov (20.6%), Vice President Leonid Fedun (9.3%), Lukoil subsidiaries (about 8%). Revenue (US GAAP, 1st half of 2011) – $64.5 billion. Profit – $6.8 billion. Capitalization (MICEX) – 1.48 trillion rubles.

Last year, Lukoil's production in Russia fell almost to the 2006 level (96 million tons). This year, the decline has continued. In October, the company produced 7.168 million tons of oil in Russia, 5.4% less than in the same month last year, and almost lost second place to TNK-BP (in terms of barrels, the companies' production was equal).

Now Lukoil is changing its strategy again: since 2012, it has been refocusing on significant investments in new projects and increasing production, Leonid Fedun, vice president and co-owner of the company, told Reuters in an interview. "We took a certain pause due to the crisis and pressure from our investors, who said that we needed to accumulate cash. We accumulated cash. Now they say: why do we need cash, we need to develop," the top manager explained.

2011 will be the last year when Lukoil's production will show negative dynamics, promises Fedun. In the next two years, Lukoil's production growth in Russia will be 2%, and abroad - 5% annually, he says. And the company expects a significant increase in production in 2013-2014 with the launch of new large projects - West Qurna and Filanovsky. In addition, the holding is interested in assets in Brazil, West Africa and North America. The possibility of participating in new projects in Saudi Arabia, including on the shelf, is also being discussed, said yesterday the president and largest shareholder of Lukoil Vagit Alekperov (his words are quoted by Interfax). Co-director of Investcafe Grigory Birg believes that Lukoil's plans to increase production abroad are achievable: the launch of West Qurna alone will give 53 million tons per year. But achieving production growth in Russia will not be easy, the analyst believes: the company's Russian hope, the Yuzhno-Khylchuyuskoye field, has not justified itself; the project has not been able to reach the planned production level of 7.5 million tons per year. In 2010, production there fell by 1.5% to 6.89 million tons, and the water cut was 31.4% against 2.1% the year before. According to Birg, Lukoil's previous forecasts (+1.6% growth per year) look more realistic.

Lukoil Changes Priorities Again