President of Russian oil major LUKOIL told investors in New York Tuesday his company planned to increase its gas share to 30%

Tuesday, February 7, 2023

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Vagit Alekperov, president of Russian oil major LUKOIL, told investors in New York Tuesday his company planned to increase its gas share to 30%. LUKOIL currently produces about seven billion cubic meters of gas, including 4.5 billion cubic meters of casing-head gas, and plans to up its output to some 50 billion cubic meters of gas by 2015, Gazeta.Ru reported. "LUKOIL's 1.1 trillion cubic meter deposits enable it to boost gas production," Mikhail Bakulev, an analyst with the AVK investment brokerage company, said. Gazprom alone may hinder the implementation of ambitious LUKOIL plans because the natural monopolist does not always allow independent gas producers to use its pipeline network. However, Alekperov did well to improve relations with Gazprom. In late March 2005, he signed a strategic partnership agreement with Gazprom until 2014. LUKOIL voiced its readiness to finance the development of Gazprom's gas transport system. The companies also stated their intention to jointly implement oil and gas projects in Russia, the Caspian region and Uzbekistan. LUKOIL agreed to sell all the gas from the Nakhodka deposit in Western Siberia) to Gazprom in 2005 and 2006 straight from its gas wells. Gazprom will therefore receive 11 billion cubic meters of gas per year. "LUKOIL will not quarrel with Gazprom. LUKOIL will have to eliminate the monopolist's possible gas shortages," Dmitry Mangilev, an analyst with the Prospect investment company, said. Both companies consider this cooperation scenario to be quite profitable. The natural monopolist pays less for gas, subsequently raising end-consumer prices. LUKOIL "spends nothing on transportation and it isn't facing any pipeline-access problems," Mangilev said. Sergei Glazer of Vostok-Nafta, a Gazprom minority share holder, also expressed doubt the LUKOIL could face problems. "Independent producers often have trouble selling their gas, storing it inside pipelines. No one voices such claims to LUKOIL," Glazer said. "The company helps Gazprom to develop the infrastructure of new regions. This is why Gazprom and LUKOIL have established a special relationship."