Contractors working on land projects in Western Siberia and Komi are notified of the suspension of contracts, but are asked to retain staff to resume work in November. An interlocutor close to one of LUKOIL’s major contractors believes that it will be impossible to fully maintain the number of employees. According to him, the reduction may amount to at least 30% of the staff, and for individual projects up to 100%, if the oil companies do not pay for downtime. He hopes there will be compensations, especially if the government agrees on the support of oilfield services companies.
Fedun compared the OPEC + agreement with the Brest Peace
Amid falling world oil prices – from $ 72 per barrel in early January to $ 25 – LUKOIL decided in March to cut spending by $ 1.5 billion (about 20%), co-owner and president of the company Vagit Alekperov told reporters. But then he emphasized that the reduction does not apply to those projects that are directly related to the provision of geological exploration and oil production.
After the largest oil producers agreed on April 12, under the OPEC + deal, a record reduction in production by 9.7 million barrels. per day (about 20% for the alliance) since May 1, due to a drop in demand caused by coronavirus, Russian oil companies are forced to proportionally reduce production: in accordance with this transaction, Russia should reduce production by 18% (1.8 million barrels). ) – up to 8.5 million barrels. per day.
Urals became more expensive than North Sea oil
Under the new agreement, OPEC + LUKOIL will reduce oil production by 18% – by more than 40 thousand tons per day, Alekperov said. “And I think that we and all other companies will fulfill this amount, which was brought to us by the Ministry of Energy,” he said (quoted by Interfax).
“For the oil industry, this is (a reduction in production in Russia to 8.5 million barrels per day. – RBC) just a shock! ” – said in an interview with RBC Vice President and another co-owner of LUKOIL Leonid Fedun. “I understand all the engineers and technologists who work selflessly in the wells. For them, shutting a well is scary. And then this will happen in large numbers. We will have to drastically reduce drilling, repairs, and most likely, we will have to close the low-efficient oil well fund, ”he pointed out.
Alekperov and Fedun expect that after the start of the OPEC + agreement, the price of oil will rise to $ 30 per barrel.
RBC sent a request for plans to reduce drilling and exploration to Rosneft, Gazprom Neft and Surgutneftegaz.
What other risks are there due to reduced production
LUKOIL, before the coronavirus pandemic, was planning in 2020 to increase investments in exploration by one and a half times – up to 66 billion rubles, said Vice President of the company Ilya Mandrik in December 2019. Funds were supposed to go including drilling, both in Russia and on the shelf of Mexico.
Fedun – RBC: “Without the OPEC + deal, we would have to reduce production to 50%”
Now the company can not only reduce drilling, but also close a number of fields in Komi at the LUKOIL-Ukhtaneftegas fields, Reuters wrote April 23, citing a source familiar with the company’s plans. However, LUKOIL then told the agency that it did not plan to close its oil producing enterprises, considering options for reducing production volumes “with the least impact on economic indicators.”