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. Last Updated: 07/27/2016

LUKoil Cultivates Deep Interest in Caspian Sea

BAKU, Azerbaijan -- Russian oil giant LUKoil sees the Caspian Sea as one of its core areas of business, company vice president Ravil Maganov said.

"We have always said one of our main priorities is the Caspian region, and our interest in Azerbaijan has not diminished," Maganov said in an interview late Tuesday.

LUKoil has shares in three of the 17 projects in the Caspian Sea state, including 10 percent in the BP Amoco-led $11 billion Azerbaijan International Operating Company.

The company is also active in other spheres in Azerbaijan, including petrol stations, construction firms, import-export businesses and insurance companies.

Many attribute the company's involvement to the fact that LUKoil president Vagit Alekperov is from Azerbaijan and has good ties with Azeri President Heidar Aliyev. But analysts say the company has avoided being overly used as a Russian instrument of foreign policy in what was once a Soviet republic and previously part of Tsarist Russia.

"We have a commercial outlook here, not political, and we participate in the projects we want to," Maganov said.

One project is a $2 billion consortium to develop the Yalama structure in the northern Caspian, near the sea border with Russia. LUKoil and U.S. Arco joint venture LUKArco share a 60 percent stake and operate the deep-water block.

"We're still interpreting the data from the seismic results, and we'll make a decision in September whether or not to continue with the project," Maganov said.

He said recent findings had shown the structure to be less broken up than expected and he estimated reserves anywhere from 130 to 250 million tons in the Azeri part of the block.

"We believe that only one third of the reserves are in the Azeri sector, the rest is in Russia, and we should get the license for that portion sometime next week," Maganov said.

Yalama's success looked doubtful earlier as preliminary results showed complex geological structures with small amounts of oil in different strata, making it hard to develop.

Geologists consider the 1,000 square kilometer block as risky as it is in an area that has never been explored before and expensive as it is far from drilling and pipeline infrastructure.