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. Last Updated: 07/27/2016

Yukos Plans to Boost Exports by 40% in 2003

Yukos said on Friday it planned a huge increase in oil exports in 2003, including to China and the U.S., but pipeline bottlenecks will increase its reliance on costly rail links as output booms.

The country's second-largest oil producer said in a statement its exports would increase 40.6 percent in 2003 to 1.05 million barrels per day, the highest level ever reached by a Russian firm.

But it warned its costs were likely to grow significantly as rail and river exports were much more expensive than pipeline shipments and said its oil output growth beyond 2003 would largely depend on its ability to market its barrels.

Yukos also confirmed its 2003 output would increase by 18.6 percent from an average 1.4 million barrels per day production in 2002, which could potentially make it Russia's top oil producer, a spot currently held by LUKoil.

"Given the constraints of the pipeline system we will have to use combined routes more actively. Next year we expect to export up to 7 million tons by other than pipeline means," Yukos CFO Bruce Misamore said. "Shipping a greater proportion of the production through less efficient means will contribute to the cost increase."

Russia's oil production is growing for the fourth straight year and hit 8 million bpd in November. Oil majors are keen to use alternative routes to lucrative Western markets, as state pipeline monopoly Transneft can only handle 3.5 million bpd.

Misamore said Yukos' alternative shipments would include exports by rail to China, which are set to grow to 50,000 bpd from 40,000 bpd this year, and major Russian ports.

He also said Yukos would keep shipping at least one large crude oil cargo a month to the United States in 2003, after successfully delivering its first shipments this year.

"We were sending 2 million barrels a month to the U.S. this year and we expect this to continue next year," he said.

Yukos this year became the first Russian firm to sell a very large crude carrier directly to the United States after the two states, enjoying increasingly friendly relations, signed an energy partnership last May.

Yukos said it expected its exports and domestic sales of petroleum products to change little from anticipated levels for 2002, reaching a forecast 10.2 and 17.1 million tons respectively in 2003.

Yukos natural and associated gas production target for 2003 was set at 5.6 billion cubic meters. The firm also approved capital expenditure of $1.76 billion for 2003, from $1.29 billion in 2002.

"We will have an abnormally high year of capital expenditures, mainly due to investment in infrastructure," Misamore said.

In 2003, $1.44 billion will be spent for exploration and production, $256 million for refining and marketing and $67 million for corporate expenditure.

This year, Yukos has spent $903 million for exploration and production, $328 million on refining and marketing and $57 million for corporate expenditure.

"Our next year budget is based on the price of Brent of $22 per barrel. In the case it falls below $15 we are likely to revise our capex. ... Our further [production] growth will depend on how much we can market," Misamore said.