Lukoil says Iran is target, sees deal imminent

Russia’s Lukoil company says it hopes to reach an agreement on development of two oil fields in Iran in the first half of the year. 

Lukoil is in talks with the National Iranian Oil Company about developing the Ab Teymour and Mansouri fields in western Iran, head of upstream operations in the Middle East Gati al-Jebouri said on Sunday.

The official called Iran “our target area at the moment.” The company, Russia’s second oil producer, signed several initial contracts with NIOC last year and visited the oil fields.

Jebouri said Lukoil had done “significant amount of analysis as to how we potentially can develop the project” and presented its technical proposals and views to the Iranian side.

“We are discussing their feedback. We would like to have some decision during the first half of 2017 from the Iranian side but there are no strict deadlines to this process,” he was quoted as saying.

Lukoil is one of the 29 foreign companies which Iran recently shortlisted for work in the energy-rich country which has defined as many as 70 oil and gas projects for development after the lifting of US-led sanctions last year.

Jebouri said Lukoil was in active discussions with NIOC with respect to budget cost structure, adding the two sides would start negotiations on contractual terms if the development plans were accepted by the Iranian side.

Lukoil is currently developing the second phase of West Qurna oil field in neighboring Iraq after starting it with 400,000 barrels per day.

Focus on Middle East

The company has turned its focus to the Middle East, with Jebouri saying it was looking into opportunities also in Kuwait, the United Arab Emirates and Oman.

An expected decline in Russia’s crude production and lower oil prices have prompted Lukoil to redirect its operations, dropping some of its costly exploration projects and moving to cheaper places such as Iran.

Lukoil Chief Executive Vagit Alekperov has said it was very lucrative for international energy companies such as Total, Lukoil and Eni to invest in Iran.

Lukoil, however, is abandoning its natural gas exploration in Saudi Arabia after the project in the kingdom’s Empty Quarter desert didn’t produce commercially viable results.

Jebouri said Lukoil returned four gas exploration wells to Saudi Arabia’s state producer Aramco at the end of last year and will shut the venture by the middle of 2017.

Other Iran projects

Lukoil had an exploration contract dating back to 2003 for Iran’s Anaran block after striking oil jointly with Norway’s Statoil at the Azar and Changuleh fields. The two companies, however, pulled out of the project in 2011 after the US and Europeans intensified sanctions on Iran. Alekperov has said he had discussed Lukoil’s return to Azar with Iranian officials.

Last June, the Russian producer said it was resuming refining Iranian oil on the Italian island of Sicily where Russian Urals was used during years of sanctions on Iran.

Alekperov said then oil from Iran was the best option for Lukoil’s ISAB refinery, because it was designed for 70 percent of heavy oil from Iran.