Lukoil News 2012

News summaries from company press releases and from unaffiliated news agencies are provided below. The summaries are sorted by month and are further categorized as upstream news, downstream news, and business/finance news.

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January

• Upstream news:

• Downstream news:

- A turnkey project-implementation contract was signed in Sofia today for a heavy-residue hydrocracking complex to be built at the LUKOIL Neftochim Burgas refinery. The project will be implemented by the Italian branch of Technip. Implementation of the project will allow to increase the output of Euro-5 diesel fuel by 1.2 million tons per year and also to close down the production of high-sulfur fuel oil. The key element of the new complex is a tar hydro cracker with an annual capacity of 2.5 million tons. Commissioning of the new complex is expected in January 2015.

- LUKOIL was notified that the Board of Directors of the Italian ERG has resolved to sell to LUKOIL 20% in the joint venture. The joint venture was established to operate the ISAB refining complex located in Priolo (Sicily).This is a partial exercise of ERG’s option to sell its stake according to the agreement of 2008 to create a joint venture.Thus, LUKOIL’s stake in the joint venture can be increased from 60% to 80%.

• Business/Finance news:

- The OAO LUKOIL Board of Directors held a meeting in Moscow to summarize the Company’s preliminary performance results in 2011 and set priorities for 2012 and the near term. According to the Russian classification, the hydrocarbon reserves increment in 2011 may reach 143 million tons of reference fuel (TRF). Five fields (in the Komi Republic, the Perm Region, Western Siberia and the Volgograd Region) were discovered. In addition, 20 new deposits were discovered at the fields already under development. The year saw the commencement of raw hydrocarbon production at two new fields located in the Perm Region and the Volgograd Region. In 2011, hydrocarbon production by LUKOIL Group (including what is produced by subsidiaries and the share in affiliated companies’ production) is expected to total 112.7 million TRF, which is 4.6 million TRF lower than in 2010. As for crude oil, LUKOIL Group’s expected production figure is 90.7 million tons, of which 84.7 million tons will be produced in the Russian Federation and 6 million tons abroad. A technological break-through achieved in 2011 allowed to enhance the forecast of an economic commencement in 2012-2021 of an additional 3.6 billion barrels of oil reserves by way of raising the oil recovery factor at fields within the Russian Federation. Maximum efficiency was achieved thanks to the introduction of new technical and engineering approaches enabling maximum contact with the collector as new production wells and sidetracks of the existing wells are drilled, and also the application of well completion techniques characterized by multi-zone fracturing, which tripled the rates. Gas production volume by LUKOIL Group is expected to reach 22 billion cubic meters in 2011, a 3.2% increment on the 2010 figure. Last year, LUKOIL exported 41.3% of the oil produced in Russia. The oil stock refining volume for the Company’s refineries is expected to be 53.5 million tons in 2011, including 45.3 million tons for the Russian refineries (including mini-refineries) and 8.2 million tons for the overseas refineries, due to the raising of the Company’s stake in the ISAB Complex up to 60%. Yet, as against 2010, the overall volume of refining has gone down by 3% in connection with the scheduled outage at the PAO “LUKOIL Odessa Refinery” and the lowered loading of the refineries in Bulgaria and Romania, which is part of operational planning aimed at minimizing the operation losses. The retail sales volume of petroleum and gas products via the LUKOIL Group marketing organizations will total 15.7 million tons, 6.1 % higher than in 2010. The sales of the Russian companies supplying petroleum products rose by 17.8% and came to 8.3 million tons The retail sales of petroleum products by the European interregional companies will exceed 6.6 million tons in 2011, which is 4% higher compared with the 2010 level.

- OAO LUKOIL has created a Shareholder’s Personal Account on the Russian version of its website www.lukoil.ru (section “Investor and Shareholder Center” / “for Shareholders”). A similar service has been launched at www.rcnikoil.ru (section “for LUKOIL Shareholders”), the website of ОАО "NIKoil Registrator" which is the registrar for the Company’s securities. With this tool, the shareholder can get information on his shares, dividends, the Annual General Shareholder’s Meeting, the data contained in his personal profile and other current information related to his shareholder rights.

- The OAO LUKOIL Press Service would like to announce that Vadim Gluzman has retired of his own accord from the post of Chief Executive Officer of the LUKOIL Americas Corporation. He also terminated his employment with LUKOIL Group as of January 1, 2012.

- The OAO LUKOIL Press Service would like to announce that as of 1 February of 2012 the wages and salaries of employees of LUKOIL Group’s organizations within Russia will be adjusted by 6.1% on average. The decision is aimed at raising the real content of the earnings in view of the inflationary developments.

February

• Upstream news:

- OAO LUKOIL finished an evaluation and independent audit of its oil and gas reserves as they stand on December 31, 2011. The evaluation was performed in accordance with the US Securities and Exchange Commission (SEC) standards until the economic limit of commercial production is reached. The audit results by Miller and Lents, a US firm, suggest that the Company’s proved hydrocarbon reserves as of December 31, 2011 came to 17.3 billion barrels of oil equivalent, including 13.4 billion barrels of oil and 23.2 trillion cubic feet of gas. The oil already produced was replenished more than 100% through an increment in proved reserves in 2011. A total of 619 million barrels of oil equivalent was added to the proved reserves due to geological exploration, production drilling and acquisitions, while reinterpretation of previous assessments raised the proved reserves figure by another 197 million barrels of oil equivalent. Significant progress was achieved in 2011 in the preparation and commissioning of a number of new fields of the Company, which allowed the Group to transfer 170 million barrels of oil equivalent from the contingent resources category to the category of proved reserves. At the same time rapid production drop at the Yuzhno-Khylchuyuskoye field, as compared with earlier forecasts, led to a fall in the proved reserves by 147 million barrels of oil equivalent.

- The Government of the Russian Federation has honored employees of OAO “LUKOIL”, its subsidiaries and contractors with an award to distinguish their scientific and technical achievements in the development and implementation of innovative techniques and process solutions for the construction of an oil transportation system in the waters of the Arctic Ocean. The employees have been awarded for the Varandey Oil Loading Terminal project in the Barents Sea, the Nenets Autonomous District. The storage capacity of the coast tank farm amounts to 325 thousand cubic meters. It is connected by 2 subsea 820mm lines with the fixed offshore ice-resistant oil platform (FOIROT), 17 m deep and 22 km off the coast. FOIROT was built at the OOO LUKOIL-Kaliningradmorneft’s metalwork plant.

- President of OAO “LUKOIL” Vagit Alekperov and the Governor of the Astrakhan Oblast Alexandr Zhilkin in Astrakhan attended a ceremony to lay a corner stone for offshore oil and gas facilities at V. Filanovsky field. Memorial tablets were fixed upon the base sections of a riser block (RB), living quarter module (LQM-1) and ice-resistant fixed platform No.1 (IRFP-1). As it was reported earlier, LUKOIL had concluded construction contracts with Krasnye Barrikady shipyard (RB and LQM-1), OAO “Obyedinyonnaya Sudostroitelnaya Korporatsiya” (IRFP-1) and OAO “Global-Engineering” (Central Processing Platform, CPP).

• Downstream news:

- LUKERG Renew and Raiffeisen Energy & Environment signed an agreement on the acquisition of a 100-percent stake in a wind farm near Dobrich, Bulgaria. The wind farm, commissioned in 2009, has a total installed capacity of 40 MW, which constitutes 10% of Bulgaria’s wind sector. The transaction, now being approved by Bulgaria’s antimonopoly authorities, is to be closed in the first half of this year.

- The OAO LUKOIL would like to announce that the Board of technical enquiry into the causes of the fire outbreak at the Stavrolen petrochemical facility and the ensuing breakdown of an ethylene-producing unit on December 15, 2011, completed its work on February 4, 2012. The Board’s report says that most probably the fire was caused by the unsealing of connecting elements in the assembly for separation of the propane-propylene fraction. The unsealing, in its turn, was caused by corrosion and structural changes that had occurred while the equipment was in use. By preliminary estimates, the damaged and destroyed property is worth almost 812 million rubles. According to the time schedule of manufacture and delivery of the new equipment, ethylene unit operation is expected to resume no later than on April 1, 2012.

- LUKOIL’s wholly owned subsidiary ОАО “RITEK” has sold 365 thousand tons of carbon units in the European emissions market pursuant to the Kyoto Protocol (1 carbon unit equals 1 ton of greenhouse gas emissions abatement in СО2 equivalent). The Company managed to reduce emission volumes through three associated gas utilization projects at Sredne-Khulymskoye, Vostochno-Perevalnoye and Serginskoye oil fields in Tyumen region, where 30 Megawatt gas reciprocating units for power and heat generation were put into operation. These units consume around 40 million cubic meters of associated gas annually, and the Company could stop flaring at the fields. LUKOIL intends to invest the receipts from carbon unit trades in new emission abatement and associated gas utilization projects.

- President of OAO “LUKOIL” Vagit Alekperov and Astrakhan Oblast Governor Alexander Zhilkin attended in Astrakhan the ceremony to lay the capsule for the two combined cycle gas turbine (CCGT) plants on site the city’s boiler station Tsentral’naya. The ceremony will mark the beginning of construction of the two units, totaling 235 Megawatts in power. It is planned that the two 120 and 115 Megawatt CCGT plants will be commissioned in the third quarter of 2013. The efficiency of the new CCGT plants, conforming to the highest world standards, will exceed 51% and ensure that specific consumption of fuel to produce power is reduced by one and a half while the rate of harmful emissions are two or three times below those from a conventional heat and power station.

- Vagit Alekperov, OAO LUKOIL President, and Oleg Chirkunov, Governor of Perm Region, signed a 2012 Cooperation Protocol between the Company and the Region in Perm. Under the document, the amount of additional funding of LUKOIL investment projects in the Region will come to RUR 800 million.

• Business/Finance news:

- The OAO LUKOIL Press Service would like to announce that Vladimir Zhukov, former Director General of OOO LUKOIL-Permnefteorgsintez, has been appointed Director General of OOO Stavrolen. Nikolay Degterev, former Director General of OOO Stavrolen, has retired on a pension. Vasily Anisimov, former First Deputy Director General and Chief Engineer of OOO LUKOIL-Volgogradneftepererabotka, has been appointed Director General of OOO LUKOIL-Permnefteorgsintez.

- The Board of Directors of OAO LUKOIL approved lists of candidates for election of the Board of Directors and the Audit Commission at the 2012 Annual General Shareholders Meeting.

- OAO “LUKOIL” press service would like to announce the following appointments due to corporate restructuring and changes in staff schedule: Anatoly Barkov, appointed Vice President, General Affairs, Corporate Security and Communications; Vladimir Vasilyev, appointed Vice President, Taxes; Vadim Vorobyev, appointed Vice President, Petroleum Products Sales Coordination; Denis Dolgov, appointed Vice President, Energy; Oleg Durov, appointed Vice President, Oil Refinery, Petrochemistry, Gas Procession; Sergey Malyukov, appointed Vice President, Internal Audit and Control; Ilya Mandrik, appointed Vice President, Exploration; Ivan Masliaev, appointed Vice President, General Counsel; Aleksandr Matytsyn, appointed Vice President, Finances; Anatoly Moskalenko, appointed Vice President, Human Resources Management, Corporate Structure Development; Vladimir Mulyak, appointed Vice President, Technologies, Oil and Gas Fields Development; Valery Subbotin, appointed Vice President, Sales and Supplies; Gennady Fedotov, appointed Vice President, Economics and Planning; Leonid Fedun, appointed Vice-President, Strategic Development; Evgeny Khavkin, appointed Vice President, OAO “LUKOIL” Secretary General; Lyubov Khoba, appointed Vice President, Chief Accountant.

- Vagit Alekperov, LUKOIL President, and Natalya Komarova, Governor of Khanty–Mansi Autonomous District–Yugra (KhMAO), signed a supplemental cooperation agreement for 2012 between the Company and the District in Kogalym. Under the document, LUKOIL-Western Siberia will allocate RUR 1.165 billion towards the construction, design, repair and development of 46 social facilities located in Kogalym, Langepas, Pokachi, Urai and also in seven KhMAO regions.

March

• Upstream news:

- LUKOIL President Vagit Alekperov participated in the negotiations between Mikhail Bogdanov, the Russian Federation President’s special representative for the Middle East and Deputy RF Minister for Foreign Affairs, Nouri al-Maliki, Iraqi Prime Minister, Abdelkarim al-Luaybi, Iraqi Oil Minister, and Labid Abbawi, Iraqi First Deputy Minister for Foreign Affairs, which took place in Baghdad on March 1st. In the course of the talks, the Russian party expressed support for the Iraqi government in its efforts to maintain stability in the country, suppress terrorism, recover economy and improve the social standing of the Iraqi people, while the country continues to strengthen its unity and sovereignty. A common opinion was expressed as to utmost urgency and importance of promoting cooperation in oil and gas, as well as in personnel training for the Iraqis. Mr. Alekperov briefed the Iraqi leadership on the West Qurna-2 project implementation. Concrete opportunities to enhance the economic efficiency of the project, the issues surrounding Russian employees’ security in Iraq, as well as the outlooks for extension of the Company’s presence on the Iraqi market were discussed.

- The OAO LUKOIL Management Committee approved the Annual Research and Technology Program of LUKOIL Group for 2012 and the Group's Midterm Research and Technology Development Program for 2013-2014. The Annual Program covers 990 topics within research, development and technological work in such areas as development and operation of oil and gas fields, geological exploration and estimation of the raw material base, and other research-and-technology works and services.

- LUKOIL Mid-East Ltd (West Qurna-2 project operator) has signed several major contracts for the West Qurna-2 field infrastructure development in Iraq based on the tender results.The contract with Samsung Engineering (Korea) sets out 29 months to construct 5 well pads with 67 development wells, 5 gathering lines, a central processing facility (CPF), a water intake on the Euphrates River and a water pipeline to the CPF, a power supply system and a field camp. The contract also covers utilities for water treatment, distribution and disposal (including formation water), fuel gas extraction, instruments, drainage systems, commercial oil storage tanks and pumping facilities, administration buildings, workshops, warehouses, chemical analytical laboratory, fire station, central control room and other facilities.

• Downstream news:

- LUKOIL Group's Stavrolen petrochemical plant is to resume polypropylene production in the coming days. This became possible due to the purchase of raw stock, propylene, from Karpatneftekhim (a LUKOIL subsidiary) and from a number of Russian manufacturers. Currently, about 4,000 tons of propylene are en route. However, due to snow drifts the arrival of the raw stock is expected two to three days later than planned. As soon as the first tanks loaded with propylene cross the border of the North Caucasus Railway, start-up operations will begin at the polypropylene plant which is ready for commissioning.

- LUKOIL is conducting energetic repair and maintenance operations to cure the effects of the fire outbreak which took place in mid-December of 2011 at the ethylene production unit of the Stavrolen petrochemical complex. It was expected that the ethylene production unit could resume its operations by April 1, 2012 at the latest, provided that the required equipment was manufactured and delivered in due time. However, in view of the fact that part of the damaged equipment can be manufactured only abroad due to its unique nature and technical complexity, the repair and maintenance operations schedule has been extended.

• Business/Finance news:

- LUKOIL has published consolidated US GAAP financial statements for 2011. The Company’s 2011 net income rose by 15.0% and reached $10,357 million. EBITDA (earnings before interest, taxation, depreciation and amortization) rose by 15.9% and reached $18,606 million in 2011. Sales revenues were $133,650 million (+27.3% y-o-y). The positive dynamics of our financial results was mainly due to a sharp increase in hydrocarbon prices in 2011 compared with 2010.

April

• Upstream news:

- LUKOIL started production drilling and construction of a key production facility, namely a Central Processing Facility, at the West Qurna-2 field in Iraq. Abdel Karim al-Luaibi, the Iraqi Oil Minister, and also the heads of the Basra province, Iraq's South Oil Company, LUKOIL Overseas and of the major contractor companies Baker Hughes and Samsung Engineering all participated in the festive ceremony dedicated to the occasion. As part of this drilling project, 23 directional wells will be constructed. Drilling operations will occur simultaneously at 5 well pads by means of state-of-the-art diesel electric units with a bearing capacity of 450 tons, which allows workers to drill wells as deep as 5,000 meters without equipment remounting. The units are specially modified to be promptly relocated within the well pads under the cluster slider rig scheme. Later the drilling operations will be conducted at the other 4 well pads with similar units. The Central Processing Facility will be constructed along with the facilities for well pads infrastructure development and oil gathering lines, as well as the water and power supply systems, shift camp and a number of other infrastructure and support facilities.

• Downstream news:

- The company LLC-International (a wholly-owned LUKOIL subsidiary) signed an Agreement with General Motors Powertrain Uzbekistan for the first filling of lubricating oil into the engines manufactured by General Motors in Tashkent. The Agreement will be valid for 3 years.

- Vagit Alekperov, OAO LUKOIL President, and Sergey Kirienko, General Director of the State Nuclear Energy Corporation ROSATOM, signed a strategic partnership agreement between the Company and the Corporation, in Moscow. Under the terms of the document, Rosatom will engage LUKOIL Group organizations in biddings for the supply of petroleum products, namely, gasoline, diesel, jet fuel, liquefied hydrocarbon gases, fuel oil, oil bitumen and various-application oils for corporate needs. For its part, LUKOIL will engage the Rosatom organizations in competitive participation in equipment purchases for petrochemical production, generation of thermal and electrical power, and also for pipeline transport. The Agreement will be valid for three years.

- OOO LUKOIL-Nizhnevolzhskneft (a wholly-owned LUKOIL subsidiary) and Bumi Armada Caspian (subdivision of Malaysia’s Bumi Armada Berhard) signed a contract in Astrakhan to construct subsea pipelines at the Vladimir Filanovsky field located in the Northern Caspian Sea. Specifically, the contract sets out the laying of oil and gas pipelines on the sea floor to connect the V. Filanovsky and Yu. Korchagin fields. Each pipeline will be about 40 kilometers long. The pipelines will be equipped with band anodes, three-layer insulation based on extruded polypropylene, and solid concrete ballasting coating.

- LUKOIL Belgium N.V. (a member of LUKOIL Group) signed an agreement with Verolma Group to acquire 46 filling stations in the Netherlands and 13 ones in Belgium. Out of the total number of gas stations 29 ones are owned by dealers. The transaction is to be finalized in the second quarter of 2012 after the appropriate permissions are granted by the Dutch and Belgian regulating authorities. LUKOIL Belgium N.V. signed an agreement with NGM Group to acquire 8 filling stations in Belgium in January of 2012. The acquired filling stations use different brands in their operation and will be rebranded to be compliant with the LUKOIL corporate style after the deal is closed.

- Vagit Alekperov, President of OAO LUKOIL, and Jose Luis Porté, President of Meroil, participated in the festive ceremony dedicated to the commissioning of a new petroleum terminal at the port of Barcelona (Spain). The project was implemented by a joint venture (50/50) established in July, 2010 between LITASCO, an international oil trader (a wholly-owned subsidiary of LUKOIL), and the Spanish company Meroil. The new terminal was constructed as part of a project to expand Meroil’s existing terminal capacities. Thirteen new tanks with an aggregate storage capacity of 360,000 cubic meters, and ranging in volume from 6,500 to 40,000 cubic meters, were constructed within an area of 40,000 square meters. The new terminal, connected to the pipeline system of Hydrocarbonates Logistics Company, includes 8 petroleum-product loading gantries with at hroughput capacity of 400 tank trucks per day. LITASCO will use the new terminal to re-export and distribute diesel, biodiesel and jet fuel in Spain.

- OOO LUKOIL-Nizhnevolzhskneft (a wholly-owned LUKOIL subsidiary) and Saipem SPA (Italy) signed a contract to construct subsea pipelines to transport oil and gas from the Northern Caspian fields. The contract calls for the laying of two pipelines on the seabed to connect the riser block located at the Vladimir Filanovsky field with the landfall and the onshore site to the hub of plugging devices. The oil pipeline diameter will be 559 mm, its length to the coast will be 114 km and the length to the hub of plugging devices will be 10 km. The gas pipeline diameter will be 711 mm, its total length will be 114 km and the length to the hub of plugging devices will be 20 km. The work under the contract is scheduled to be completed in the second half of 2015.

­• Business/Finance news:

- The OAO LUKOIL Press Service announces that the death toll in the plane crash of the UTAIR flight Tyumen—Surgut on April 2, 2012 includes two members of OOO LUKOIL-Engineering, a subsidiary of the KogalymNIPIneft Research Institute in Tyumen. They are: Aleksandr Ivanovich Lebedev (1951), Deputy Head of the Geology Center, and Yuri Nikolayevich Fedorov (1949), a Senior Specialist of the Center.

- The OAO LUKOIL Press Service would like to announce that Azat Shamsuarov, formerly a Vice President of the Company and General Director of OOO LUKOIL-West Siberia, has been appointed OAO LUKOIL Vice President for Oil and Gas Production. Sergey Kochkurov, formerly First Deputy General Director and Chief Engineer of OOO LUKOIL-West Siberia, has been promoted to General Director.

- A traveling meeting of the OAO LUKOIL Board of Directors was held in Barcelona (Spain) to make decisions related to the 2012 Annual General Shareholders Meeting. Among other things, the Board of Directors resolved to hold the meeting on June 27, 2012, at 11:00 am at: 11 Sretensky Boulevard, Moscow, OAO LUKOIL. The record date for the list of the shareholders entitled to participate in the General Shareholders Meeting is May 11, 2012.