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Russian oil giant Lukoil says ready to freeze output

A possibility for OPEC member states to agree on limiting output will be the main intrigue of their upcoming summit on November 30

BRUSSELS, November 8. /TASS/. Russia’s largest private oil company Lukoil will freeze output, if the Organization of the Petroleum Exporting Countries (OPEC) makes such a decision at its November 30 meeting in Vienna and Russia joins it, Lukoil Vice-President Leonid Fedun said on Tuesday.

"Yes, we’re ready for cuts, if there is a government directive," the vice-president said.

"As far as I understand, the talk is not about cuts but about an [output] freeze. The answer is very simple. New deposits are highly efficient. These deposits have their production cost about two times lower than mature fields in West Siberia. That is why, from the economic logic, everything is very simple: you close down old wells that are characterized by low efficiency and we notionally have 20% of wells that yield one percent of our output. And any closure of this well immediately raises economic efficiency for the company. From the viewpoint of the economic logic, there are no complexities and all this is quite simple," the Lukoil vice-president said.

A possibility for OPEC member states to agree on limiting output will be the main intrigue of their upcoming summit on November 30.

At their Algiers meeting on September 29, the OPEC member states agreed to freeze output to stabilize world oil prices. However, participants in the OPEC technical meeting on October 28-29 failed to work out a roadmap for limiting oil output.

Non-OPEC oil-producing countries present at the meeting, in particular, Brazil and Kazakhstan, stated about the absence of plans to cut oil output in 2017.

Russia has not decided either about whether it will cut or freeze output, Russian Energy Minister Alexander Novak said earlier. 

 Russia’s biggest private oil firm Lukoil has extracted its 2 billionth tonne since it was established in 1991 to become the first Russian company to pass this milestone, the oil major said in a statement on Tuesday.

In a letter to Lukoil CEO Vagit Alekperov, Russian Energy Minister Alexander Novak noted that "this milestone was passed for the first time among Russian oil companies and, symbolically, this event occurred on the eve of the company’s 25th jubilee."

The implementation of the company’s projects contributes to the solution of the strategic task for maintaining oil production in Russia at the current level in the long term, the energy minister said.

Lukoil first among Russian companies to exceed 2 bln-tonne output

The central dispatch office of Russia’s fuel and energy sector has confirmed that Lukoil has passed the 2 billion-tonne milestone.

The oil major produced its first billionth tonne of oil 15 years after it was founded - in 2006 - and the second billionth tonne -10 years after that.

"The increased pace of production resulted from investments made by the Company in expanding the geography of its upstream projects and improving its production performance. Over the past few years Lukoil put on stream several fields in the new petroleum province on the North Caspian shelf, increased its production capacities in the Perm Region, the Republic of Komi and the Yamal-Nenets Autonomous District as well as expanded its international presence," the oil giant said in a statement.

The development of modern technology to increase the oil recovery factor has played an important role in the production growth achieved by Lukoil. The company has successfully delivered projects that were unique in their complexity, such as the Yaregskoye field of ultraviscous oil in the Komi Republic in northeast Russia, the statement says.

"In 2016, Lukoil put on stream two flagship upstream projects. One of them is the Vladimir Filanovsky, the largest field on the Caspian Sea shelf with recoverable reserves, according to the Russian classification, exceeding 129 million tonnes of oil and 30 billion cubic meters of gas," according to the statement.

Commercial production also began at the unique Pyakyakhinskoye field on the Yamal Peninsula in the Russian Arctic. The field contains 86 million tonnes of oil and gas condensate and 253 billion cubic meters of gas, Lukoil said.

Lukoil increased oil output by 3.6% in 2015 to 100.7 million tonnes. The company plans to keep oil output in Russia at 86-88 million tonnes in 2017.