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. Last Updated: 07/27/2016

Surgut Says New Fields Are Needed

Itar-TassSurgut says it does not expect any extra growth at its West Siberia fields.
No. 4 oil producer Surgutneftegaz warned Saturday that its oil output would stagnate until it puts on stream new fields in East Siberia next decade and said it may build a new giant refinery.

"I don't think we will speed up growth in West Siberia, we are not expecting any additions here. West Siberian production is planned at 65 million to 67 million tons," Surgut general director Vladimir Bogdanov told the firm's annual general meeting in Surgut, Interfax reported.

Surgut, which has been showing healthy production growth since 2000, upset analysts earlier this year when it cut its output growth forecast to 0.9 percent, to 1.33 million barrels per day, from the previous 7 percent.

Some analysts have said they might cut their ratings and earning forecasts on the firm, citing weak growth prospects, low earnings and mushrooming capital expenditures to maintain output in its west Siberia base. Surgut explores a number of big fields in east Siberia, which is set to become the next large oil province when a new pipeline to China will be built by the end of this decade.

Bogdanov said Surgut had increased its capital expenditure forecast for 2007 by 5.1 percent from the previous plan to 92.7 billion rubles ($3.60 billion) -- an increase of 38 percent from 2006.

Some 70 billion rubles will be spent on oil production and the remaining 22 billion rubles on refining and marketing.

But investments in the downstream sector may rocket in the next few years as Bogdanov said Surgut was considering building a new giant refinery next to its existing Kirishi plant near St. Petersburg -- already the country's largest by throughput.

He said the new $12 billion plant could refine 720,000 bpd, in addition to Kirishi's existing capacity of 420,000 bpd. Kirishi is Surgut's sole refiner and it is therefore forced to sell one-quarter of its crude output on the domestic market.

Analysts say Surgut has been inconsistent in its refining strategy as it has hesitated for years about whether to buy a plant, build a new one or upgrade existing facilities. Surgut's project to build a $2 billion hydro cracking unit at Kirishi to improve light-products yield to 85 percent from the current 54 percent has been delayed for more than a decade.

Bogdanov said the completion was now planned for 2009. He did not say when a new plant could be built.

He said Surgut was following power sector reform and was interested in buying control in one of the country's generating companies.

Other speculations have focused on Surgut being a possible takeover target by a state-controlled firm such as Rosneft or Gazprom. Bogdanov declined direct comments. "It is all gossip," he said.