Russia's government has demanded the right to veto all Caspian Sea oil projects.
In future, Russia is expected to extend this demand to all former Soviet Union (FSU) oil and gas projects outside Russia.
Earlier this year Russia's largest oil company, Lukoil, secured a 10% interest in developing Chirag and Azeri fields in the Azeri Caspian Sea, apparently after a firm push from Moscow.
The role of Lukoil is likely to be central to other Russian participation in FSU projects. So Lukoil is worth a closer look.
Established by presidential decree in April 1993, Lukoil contributes as much as 25% of western Siberia's crude oil production, or 15% of total Russian oil.
Last year Lukoil produced 48.8 million metric tons of crude. This was down from 57.1 million metric tons in 1992, but Lukoil said its decline was less than the 16.4% slump for Tyumen region as a whole.
REFINING OPERATIONS
Lukoil operates two refineries, at Perm and Volgograd. Last year Lukoil produced 18.8 million metric tons of refined products, or 7.4% of Russia's total products output. This year Lukoil expects to produce as much as 20.5 million metric tons of products, or 9.8% of Russia's total.
Aleksander Vasilenko, Lukoil's director of public affairs, says the company's upstream and downstream ambitions differ.
"Lukoil's board of directors has decided to concentrate downstream investment on the nearest territory first," he said. Vasilenko said 60% of capacity at Lithuania's Mazeikiai refinery, the only one in the FSU Baltic region, is processing Lukoil crude. From there Lukoil products are supplied to all FSU Baltic states.
Lukoil is looking at building refineries in the Krasnodar region of Russia and supplying products to FSU's eastern republics, Vasflenko said.
UPSTREAM AIMS
Besides the agreement with State Oil Co. of Azerbaijan to take part in development of the Caspian Sea shelf, Lukoil has a number of foreign plans.
"Lukoil intends to be very active in exploration and production," Vasilenko said. "Lukoil will try to participate in all big projects around the world. Only the degree of participation will differ."
Lukoil is discussing joint developments with the Turkmen Oil & Gas Ministry. In Uzbekistan, Lukoil has entered a joint venture with Uzbekneftegaz to develop a number of gas/condensate fields.
The company also is negotiating cooperation with companies in Kazakhstan, including the largest, Yuzhkazakhneftegaz production association.
Vasilenko said Lukoil will not stand in the way of western companies participating in projects in Kazakhstan. These include development of Karachaganak field by British Gas plc and Agip SpA and Tengiz field by Chevron Corp.
"Kazakhstan is seeking development partners for other projects," Vasilenko said. "Among potential partners is Lukoil. Kazakhstan's fields were discovered by Russian oilmen, so Lukoil has an advantage in holding all well records."
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