Lukoil Can Return to Pre-Pandemic Output With Capacity Intact

Company has some 90,000 barrels a day spare capacity in Russia Lukoil has restored two-thirds of output cut under OPEC+ deal

August 28, 2021 Stu Turley Coal, Crude Oil News, International News, OPEC, OPEC +, Top News
Lukoil - ENB

Lukoil PJSC, Russia’s second-largest oil producer, has enough spare capacity to restore output to pre-pandemic levels, indicating that OPEC+ cuts haven’t had any significant impact on its production potential.

The company has about 90,000 barrels a day of capacity this month that can be brought online, Vice President for Finance Pavel Zhdanov said Friday on a conference call. The comments allay concerns among some analysts about whether Russian wells idled as part of the OPEC+ deal would be able to return when the alliance’s restrictions ease.

Lukoil “plans to continue to quickly restore production volumes, taking into account the OPEC+ decision made in July,” First Vice President Alexander Matytsyn said on the same call.

The Organization of Petroleum Exporting Countries and its allies agreed to return 400,000 barrels a day to the market each month starting August until all of their halted production comes back online. Russia’s share in the monthly increases is some 100,000 barrels a day, and companies have been gradually bringing back output after slashing it by a fifth in May 2020. That was the deepest artificial oil-output cut in the country’s modern history.

‘As Quickly as Possible’

Lukoil reduced crude output in Russia by some 310,000 barrels a day in May last year. So far, it has restored two-thirds of that amount, according to Zhdanov. Supply is being restored “as quickly as possible” by bringing back wells at previously producing projects, he said.

In the first 24 days of August, Lukoil’s pumped 1.53 million barrels a day on average, according to CDU-TEK data seen by Bloomberg.

More than half of Lukoil’s spare capacity is located in West Siberia, with another 24% in Timan-Pechora and 16% in the Ural regions, according to a Lukoil presentation.

The company also increased drilling starting in the second quarter to “minimize the use of spare capacity this year to compensate for the natural decline in production, and to ensure production growth above pre-crisis levels in the following years,” Zhdanov said.

— With assistance by Elena Mazneva

About Stu Turley 3361 Articles
Stuart Turley is President and CEO of Sandstone Group, a top energy data, and finance consultancy working with companies all throughout the energy value chain. Sandstone helps both small and large-cap energy companies to develop customized applications and manage data workflows/integration throughout the entire business. With experience implementing enterprise networks, supercomputers, and cellular tower solutions, Sandstone has become a trusted source and advisor.   He is also the Executive Publisher of www.energynewsbeat.com, the best source for 24/7 energy news coverage, and is the Co-Host of the energy news video and Podcast Energy News Beat. Energy should be used to elevate humanity out of poverty. Let's use all forms of energy with the least impact on the environment while being sustainable without printing money. Stu is also a co-host on the 3 Podcasters Walk into A Bar podcast with David Blackmon, and Rey Trevino. Stuart is guided by over 30 years of business management experience, having successfully built and help sell multiple small and medium businesses while consulting for numerous Fortune 500 companies. He holds a B.A in Business Administration from Oklahoma State and an MBA from Oklahoma City University.

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