Lukoil # 10 (November 2017)

OnNovember15, 2017ADNOCannouncedan agreement with China National Petroleum Corp. that could lead to the Chinese oil giant joining the emirate’s major offshore concession, including the Lower Zakum, UmmAl-Shaif andNasr fields,whichexpires in March 2018 . ADNOC signs another deal ZLWK &13& “WE ARE BACK TO REALITY” Participants of the 20th annual Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) expected a recovery in the oil industry’s fortunes next year. LUKOIL wasn’t waiting on the sidelines. On October 17-19, Energy Intelligence and The New York Times co-hosted the 38th Oil &Money Conference in London. Oil Journal offers key quotes from the event. 2018: RECOVERY IS ON THE WAY À t this year’s ADIPEC, which took place in Abu Dhabi on November 13-16, H.E. Dr. Sultan Ahmed Al Jaber, UAE Minister of State and Abu Dhabi National Oil Company (ADNOC) Group CEO, confirmed ADNOC’s intention to issue the first-ever IPO for one of its subsidiary companies in his keynote address. The company in question was ADNOC Distribution, which would unlock value for the ADNOC Group in accordance with its 2030 strategy. H.E. Dr. Al Jaber also highlighted unprecedented interest in the renewal of Abu Dhabi’s offshore concessions and pointed to further diversification and expansion of ADNOC’s downstreamoperations. The forum’s official opening also featured keynote speeches fromH.E. Suhail Mohammad Faraj AlMazrouei, UAEMinister of Energy, and H.E. Mohammed Barkindo, OPEC’s Secretary General. ADIPEC 2017 came at a time of cautious optimism among oil and gas producers. In the days before ADIPEC, global oil prices topped $60 per barrel for the first time inmore than two years. Meanwhile the industry is also benefiting fromsustained and significant efforts to improve operational efficiencies and diversify operations as it adjusts to a changing energy landscape. “I said earlier this year that I am optimistic about the second half, and today I amoptimistic about the whole of 2018. I think it is going to be a very strong recovery year, andwewill seemore investments coming to the region,” said H.E. Al Mazrouei. ADIPEC’s opening day also featured two Global Business Leader sessions. One of them, titled Forging Ties – Fostering Relationships and Creating Business Models for Success, featured LUKOIL President Vagit Alekperov, The agreement was signed by ADNOC CEO Sultan al-Jaber and CNPC chairman Wang Yilin during the ADIPEC 2017. It also includes several sour gas development projects, which all lie in the shallow waters of the Persian Gulf just off Abu Dhabi’s coast. where demand for electric vehicles dropped by 60% after state subsidies ended.” Thanks to its participation in a new excess- profits tax being introduced in Russia, LUKOIL plans to invest in unconventional oil production. In the coming years the company will drill around 30 thousand economically efficient wells at Bazhenov formation inWestern Siberia. “In Western Siberia there are unique formations that contain enormous oil reserves,” added Mr. Alekperov. “They were discovered at the end of the 1970s. It’s not a shale; it’s kerogen, but very tight. The future of the Russian oil industry depends on the creation, selection and implementation of new technologies. Across [LUKOIL’s] fields alone, unconventional reserves amount up to 20 billion barrels, and we have to develop themeffectively. But we need appropriate legislation that will encourage working with unconventional reserves. Soon this legislation will be introduced in Russia. That’s why we are optimistic about the future of oil production in our country.” ADIPEC 2017 brought together more than 2,200 exhibiting companies, 27 countrypavilions, 900 speakers, 10,000 delegates, and 100,000 attendees frommore than 125 countries. ABOUT ADIPEC Held under the patronage of the President of the United Arab (PLUDWHV +LV +LJKQHVV 6KHLNK .KDOLID %LQ =D\HG $O 1DK\DQ DQG organised by the Global Energy GLYLVLRQ RI GPJ HYHQWV $',3(& is the global meeting point for oil DQG JDV SURIHVVLRQDOV 6WDQGLQJ as one of the world’s top energy HYHQWV DQG WKH ODUJHVW LQ WKH 0LGGOH (DVW DQG 1RUWK $IULFD $',3(& LV D NQRZOHGJH VKDULQJ platform that enables industry experts to exchange ideas and information that shape the future of the energy sector. The 20th edition RI $',3(& ZLOO WDNH SODFH IURP 1RYHPEHU DW WKH $EX 'KDEL 1DWLRQDO([KLELWLRQ&HQWUH $'1(& $',3(& ZLOO EH KRVWHG E\ WKH $EX 'KDEL 1DWLRQDO 2LO &RPSDQ\ $'12& DQG VXSSRUWHG E\ WKH 8$( 0LQLVWU\ RI (QHUJ\ 0DVGDU WKH $EX 'KDEL &KDPEHU WKH $EX 'KDEL 7RXULVP &XOWXUH $XWKRULW\ 7&$ $EX 'KDEL $EX 'KDEL 3RUWV DQG WKH 'HSDUWPHQW RI (GXFDWLRQ DQG Knowledge. dmg Global Energy is committed to helping the growing international energy community. Today BP, like every company, it is on a capital diet. This means that for now Iranian projects are off the table. As for the Kirkuk oil field in Iraq, we prefer to wait until stability has returned to the region. The industry still hasn’t reached “peak diet.” Break-even costs for companies average $30-40 per barrel, but capital costs continue to come down in areas like rigs and steel. Operating costs are also falling as new technologies like Big Data enable firms to shorten project cycles with fewer staff. We began to believe that $100 was the reality, but we used to be able to make money at $25 or $20 per barrel, and we sanctioned deepwater projects at $16 not so long ago. $100 was not healthy. Bob Dudley , BP CEO Du r i ng t he e r a of $100-plus oi l in years past, the quest for resources became difficult, with national oil companies being less incentivized to bring onboard international firms that could help them drive down costs. Competition also emerged from many independent oil producers, particularly in the US, where they capitalized on high prices to finance the shale boom. Today we are back to reality. It’s quiet and so we are happy. There is plenty of access to resources. It’s easier today for major oil companies. And I’m not a fan of a higher price. Over the past 30 months Total gained access to an additional 5 billion barrels of resources thanks to deals in Abu Dhabi, Qatar and Iran, as well as the $7.45 billion acquisition of Maersk Oil. It’s possible to be disciplined when it comes to capital intensity and to grow. Patrick Pouyanne , TOTAL CEO 2OJD0LNKD\ORYD $EX 'KDEL 8$( W e are undeterred by the uncertain US sanctions policy and are moving forward with negotiations for a host of upstream projects designed to significantlyexpandouroil andgasproductioncapacity. Priority would be given to four large onshore oil fields in the southeastern province of Khuzestan, namely Azadegan, Yadavaran, Ab Teymour and Mansouri, which have the potential to produce an extra 2 million barrels per day of crude. The Iranian opportunity for producing low-cost oil and gas provides some unique market opportunities for investors with little risk. It depends on the field and how much infrastructure is in any location, but for the fields we’re negotiating, the production cost is around $4-5 per barrel. Amir Hossein Zamaninia , Deputy Oil Minister of the Republic of Iran Musabbeh Al Kaabi (Mubadala), Jose Antonio GonzalezAnaya (PEMEX), AlexanderMedvedev (Gazprom) andDr Rainer Seele (OMV). Mr. Alekperov pointed out that the company possesses a portfolio of unique assets and that its reserves amount to 20 billion barrels. Each year LUKOIL’s reserves grow by more than its production, providing a strong platform for future development. The company is highly active on the global market and its financial strength has made it a major partner to the national oil companies of Mexico, Iran, Iraq and other countries. When asked about a possible future energy balance, Mr. Alekperov noted that different types of fuels complement each other, making today’s situation comfortable for both producers and consumers. “I would not make some revolutionary steps in favour of any particular fuel,” he said. “Coal, hydrocarbons, alternative energy – they all have a place. Every region is unique and needs a particular approach. We often see that political goals are dominating over economic ones in this sphere. The forced encouragement of alternative energy could bring serious problems, like inDenmark andNorway, 3 Strategy