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. Last Updated: 07/27/2016

Yukos, MOL to Invest $300M in JV

BUDAPEST, Hungary -- Hungarian oil and gas group MOL said Tuesday it planned to double its annual oil production via a Siberian joint venture with Russia's second-largest oil company, Yukos.

Yukos is the largest supplier of oil to MOL, which currently imports some 80 percent of Hungary's oil needs.

The two partners, which will invest $300 million to $350 million in production capacity, will jointly develop the Zapadno-Malobalyak oil field in western Siberia, which has an estimated 20 million tons of extractable oil reserves, and potentially more.

MOL chairman Zsolt Hernadi said his group would contribute $100 million to the 50-50 venture's costs on entering the deal and will invest $15 million to $20 million more at the end of this year.

"Through this [deal], MOL will double its annual oil production, and by strengthening its cooperation with Yukos will ensure a more secure supply," Hernadi said.

Current daily production at Zapadno-Malobalyak is around 10,000 barrels, which will double by the end of 2002 and rise to 55,000 barrels per day by 2005, MOL said. Peak yearly output of the field will be around 2.5 million tons.

The licensed area is 200 square kilometers, and MOL and Yukos will set up some 300 wells and build 100 kilometers of pipelines there.

MOL said the Russian business would generate a positive cash flow from the middle of next year.

It said production costs would be around $1 to $1.20 per barrel.

The outline deal was signed in 1999 but was delayed because of the need for a production-sharing agreement, which needed the approval of the federal government.

Creating a joint venture circumvents much of the red tape and should allow the two partners to start extracting oil later this year.