Lukoil's oil production was cut by about 310,000 b/d or 19%, when the OPEC+ agreement entered into force in May 2020, compared to the pre-crisis levels of Q1 2020.
Alekperov told reporters on the sidelines of the ADIPEC conference in Abu Dhabi:
- It is about 83 million mt of liquid hydrocarbons while OPEC+ restrictions are still in force
The company managed to recover production by 210,000 b/d on May 2020 levels in the 3rd quarter.
Lukoil's spare production capacity currently stands at about 30,000 b/d, Alekperov said:
- We hope that if production volumes grow at this rate, we will be fully utilizing our production capacity of oil both in Russia and abroad at the end of January-February
- No, production in Russia can be affected by deficit of investments
- Due to the pandemic we have a drop in investments in new projects
- That's the main risk that can hamper our plans to increase production
Lukoil was happy with current conditions of the OPEC+ deal, which will bring an additional 400,000 b/d to the market every month, according to Alekperov.
- We believe it supports the market
- The price is stable, it is not growing
- This is the volume that can satisfy the market demand
- There is uncertainty due to the pandemic and just how serious restrictions will be, especially with our partners in European countries,
- I doubted that oil prices would go as high as $100/b in the near future
- We are not interested in high prices and our mission and the mission of OPEC+ is to satisfy demand first and foremost
- Therefore OPEC+ countries do not have a strategic objective of prices growing drastically
Lukoil was closely monitoring progress made with Iran's nuclear talks, which paused over the summer for the Iran elections.
Alekperov reiterated that Lukoil would be happy to return to talks on its Iranian oil projects, which were at an advanced stage, once US sanctions on the Middle Eastern country are lifted.
Lukoil was in talks with Iran to develop the Ab Teymour and Mansouri oil fields, but had to put such plans on hold in late 2018 after the US pulled out of the Iranian nuclear deal and reimposed sanctions on the country's oil industry.
- We are interested in coming back to these fields
- A lot of work has been done some time ago, we know these fields and their geology
- For now meetings are not planned, we are observing the process of settling nuclear concerns and as soon as we feel it is right, we will hold these meetings
Lukoil was also studying how to improve economics of its participation in the West Qurna 2 project in Iraq.
The company had previously considered quitting the project in the country due to the current investment climate, but Iraqi authorities refused its request to sell part of its stake.
- Economics of the project is not in line with the investor expectations, we continue our negotiations and to develop our estimates to improve separate specific elements of our suggestions
However, in addition to Iraq's involvement in the OPEC+ deal and ongoing security concerns, the field's expected plateau was repeatedly revised down to 1.2 million b/d from 1.8 million b/d, and then further to 800,000 b/d.
- We hope our suggestions will further incentivize development of Yamama formation