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. Last Updated: 07/27/2016

LUKoil Outlines Expansion Abroad

BloombergAlekperov speaking on Monday in an interview in which he urged Russia to issue more licenses domestically.
LUKoil plans to drill three deep-water exploration wells in Africa in the next year as it urges the Russian state to offer more licenses domestically, CEO Vagit Alekperov said in an interview, in which he talked about the oil major's plans for expansion abroad.

"For now, we plan to drill three exploration wells," Alekperov said Monday about the company's plans with Houston-based Vanco Energy in Ghana and Ivory Coast.

LUKoil, with projects in West Africa, Venezuela, Saudi Arabia and Iraq, is seeking to expand internationally as Russia offers fewer licenses. Its "dry hole" exploration costs increased by $174 million to $317 million in 2008, LUKoil said in its year-end financial statement. The company said last year it spent $122 million on drilling that failed to yield results in Saudi Arabia, $93 million in Azerbaijan, $20 million in Kazakhstan and $45 million in Colombia.

"LUKoil has no competitive advantages outside Russia and Central Asia," said Dmitry Lukashov, an oil and gas analyst at UBS. "To prove that there is an edge there, they need to deliver some results."

The offshore Ghana well should take roughly 50 days to drill and cost about $60 million, Vanco Energy vice president Jeffrey Mitchell said by telephone Monday. The venture is in talks to hire rigs to drill the second well off the Ivory Coast as early as the end of this year and the third well there next summer, he said.

The Ivory Coast wells should take less time to drill and cost less than the Ghana well, Mitchell said.

"After the outstanding discoveries made in the recent years on the sea shelf of Ghana, this area is one of the most promising for exploration in West Africa," Andrei Kuzyaev, head of LUKoil Overseas Holding, said in a statement on April 2.

The company is planning to sell 160 filling stations in the U.S.

"The situation today in the U.S. oil-products market is very negative for owners of gas stations," Alekperov said. "We've let some people go and we've sold off some of the assets."

LUKoil acquired 1,300 filling stations in the U.S. when it bought Getty Petroleum Marketing in 2000.

"We're not planning to leave the U.S. market," he said.

LUKoil has said it is ready to bid for licenses to the Trebs and Titov deposits, which are the largest untapped fields in the European part of Russia. The fields are located near LUKoil's Varandei export terminal on the Barents Sea.

Alekperov said that the Russian Union of Industrialists and Entrepreneurs, Russia's big business lobby, would ask the state to offer more licenses to stimulate business.

"We need the government to be more aggressive in offering fields for geological surveys and exploration," the oil executive said. The government should offer large fields that can be rapidly developed in tenders to attract investors Russian and otherwise, Alekperov said.

LUKoil's Saudi exploration showed two deposits with the potential for commercial development, Alekperov said. The reserves will be appraised and LUKoil will hold talks with Saudi officials regarding prices for gas output, Alekperov said.

The deposits hold reserves of roughly 70 million tons of gas condensate and 300 billion cubic meters of natural gas by Russian C1 and C2 classifications, Alekperov said April 9.