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Saturday
Lagniappe
Interview
with Andrey
Kuzyaev, Vice President of LUKOIL
Lukoil
Andrey
Kuzyaev
By
Oil of Russia magazine
LUKOIL Overseas Holding Ltd. was founded in December 1997
by LUKOIL to develop its international upstream projects. Today
the company manages 30 oil and gas producing and exploration
projects in 12 countries of the world successfully competing
with other leading oil majors.
Q: Mr. Kuzyaev, LUKOIL Overseas is approaching its 10th anniversary.
What are the main achievements of the company in the operational
and financial areas over the past decade?
A: Our main achievement is the proof of the viability and
far-sightedness of the decisions made 10 years ago. The idea
of LUKOIL transformation into a transnational corporation ensuring
substantial increment of reserves through overseas assets and
operating in the major global oil and gas production centers
has been brilliantly acknowledged. Today we are ready for global
competition with leading oil majors practically in all regions
of the world. Over the past decade LUKOIL Overseas multiplied
the production volume. The contribution of the company in the
incremental production of LUKOIL is 11.6%. The production planned
for the next year is 10 million tons of oil equivalents. We
are attaining high financial and economic indicators - for
instance, the net profit share of LUKOIL Overseas in relation
to the net profit of LUKOIL presently makes up 10%.
Q: What are the plans and prospects for the company's activity
in Latin America?
A: The Latin American project, in particular, and to be more
specific, the exploration project Condor in Colombia, has become
for me as the head of LUKOIL Overseas the first one started
from scratch. The agreement on the project was signed with
national company Ecopetrol in April 2002, and in 4.5 years
we discovered an oil field on the Medina structure, one of
the structures of a massive exploration block Condor in the
foothills of the Eastern Cordilleras. This is the first-ever
discovery made by Russian petroleum experts in the Western
Hemisphere. Medina that has already produced several thousand
tons of commercial oil is ready for pilot commercial operation.
We will start the operation of this field after additional
drilling out. At the same time, we are getting ready for exploration
drilling at Lengupa, another prospect of the Condor block.
We are hopeful of success here as well. In general we plan
to produce up to 1 million tons of oil equivalent per year
in the Condor project.
We are also very successful in neighboring Venezuela. In Venezuela
we are estimating the reserves of the prospective Junin-3 block
located in the Orinoco heavy oil belt jointly with national
company PDVSA. We expect to sign an agreement for development
of the block once the certification of reserves is completed.
Our forecast for Junin-3 reserves is around 1 billion tons
of oil equivalents. We are also preparing an project for oil
fields in San Tome/El Tigre region. We are not going to confine
ourselves to production only and we aspire to build a vertically
integrated oil system in the Western hemisphere. Thus we do
not rule out a possibility of construction of a refinery in
Venezuela or another country of Latin America jointly with
PDVSA.
Q: And what place is reserved for Africa in LUKOIL Overseas
strategy?
A: It was exactly in North Africa that LUKOIL acquired one
of the first foreign producing projects - the Meleiha block
in the Western desert of Egypt even before LUKOIL Overseas
has been set up. We acquired another producing asset in Egypt
6 years ago, the WEEM block near Hurgada. Both these projects
are relatively small but highly efficient; LUKOIL share in
the production volume in these projects exceeds 200 thousand
tons of oil annually.
Today our particular interest rests with West Africa, which
possesses huge and continuously growing hydrocarbon potential.
It is not long ago that we came here, it was in the middle
of 2006 but we already have 4 projects here, deepwater blocks
offshore the Gulf of Guinea, off the coasts of Cote d'Ivoire
and Ghana. We will undoubtedly increase our presence in this
most promising region.
Q: How do you estimate the prospects of cooperation with ConocoPhillips,
in particular, in the development of West Qurna-2 field in
Iraq?
A: You know, re-entrance to Iraq where the work on the mega
project West Qurna-2 was commenced 10 years ago is the task
of primary concern. West Qurna-2 is one of the unique oil fields
not only in Iraq but also in the whole world.
The regulatory environment of the Iraqi oil industry is being
formed presently. Its strategy of development calls for the
most active attraction of foreign investment. We hope to get
round the table of negotiations with the government of the
country once a new oil law becomes effective and to reach common
understanding of terms and conditions for implementation of
this project. As for ConocoPhillips, this company, as is well
known, is a major shareholder and strategic partner of LUKOIL.
Participation of ConocoPhillips in the Iraqi project is an
important component of the strategic agreement. LUKOIL and
ConocoPhillips created a work team, which is carrying out the
joint work on the project. I am sure that with the participation
of ConocoPhillips possessing enormous experience and huge potential
the implementation of the West Qurna-2 project will be more
efficient.
Q: And what is the progress as far as the Saudi Arabian Gas
Project is concerned?
A: Within the framework of implementation of joint project
with the national company Saudi Aramco we discovered presence
of hydrocarbons in the Tukhman exploration structure earlier
this year. This structure is a part of exploration Block A
located in the Eastern part of Rub Al-Khali oil and gas basin.
The total area of the block is about 30 000 km2. According
to the established procedures a notice on the discovery of
a potential gas reservoir and a relevant report with the enclosure
of initial materials was submitted to the Ministry of Petroleum
and Mineral Resources. We then proceeded with the evaluation
of the discovery in order to further study the composition
and potential of the deposit. We plan to carry out the evaluation
in 2008. In total, two wells have been drilled at the block.
Three drilling rigs are presently mobilized there; active exploration
drilling is taking place now in order to unconditionally fulfill
contractual obligations on the exploration of the block. The
operations are successful; we plan to discover a large gas
field here, to present reserves data at the Ministry of Petroleum
and Mineral Resources of the Kingdom and to get a permit for
continuation of operations.
Q: It is known that today the HR potential becomes one of
the weighty factors of competitiveness of a company. So how
the HR policy of LUKOIL Overseas is formed now?
A: The present day competition in the global oil and gas industry
is the competition of technologies and human potential. And
consequently we pay a great deal of attention to HR policy
and have gained solid success in this area. Today LUKOIL Overseas
employs unique international staff consisting of almost a thousand
people. 70% of our employees speak fluent English; most of
them possess a wide experience of working in international
projects. Our HR potential develops qualitatively and quantitatively.
In five years' time the company will employ around 5 thousand
people. We use various sources when hiring new staff. Those
are, in particular, the entities of the LUKOIL Group where
the HR reserve consisting of 300 people who will work in international
projects was formed by decision of the board of directors and
order of the president of the company.
Naturally we develop our own experts - a program for training,
advance training and professional development of personnel
has been created and is successfully implemented at LUKOIL
Overseas. The main forms of training are in-house seminars,
short-term workshops and traineeship seminars in foreign oil
companies, on-the-job-training, foreign language training.
We actively engage graduates of leading higher educational
establishments in our work; we focus on special training of
young experts and arrange for practical training and traineeship
for students. The personnel of regional representative offices
and operating companies consist mainly of representatives of
local population. The employment and labor relations are respectively
regulated by local legislation.
Q: By the way how does you company implement the principles
of social responsibility of business?
A: The Social Code has been adopted at LUKOIL, and in our
work we implement all principles of socially oriented business
that are accepted in the Parent Company. Our objective is to
do everything for local population so that they can feel certain
improvements, which are brought by our company into the region,
in their everyday life. Thus we create new jobs for local population,
use the system of staff rotation in order to engage the local
population into the operational process, we implement active
social policy and carry out charity and sponsor work. The Company
is an exceptionally prompt taxpayer. We stick to the principle
of priority of local producers and suppliers of goods, works
and services. Additional taxable base is formed by means of
local procurement and creation of new highly paid workplaces,
goods traffic is increasing steadily as well as other indicators
of economic activity of regions of the Company's presence.
LUKOIL Overseas regularly renders charity assistance to various
social and cultural organizations and institutions and is an
active participant in multiple social and cultural events in
all regions of activity. An extensive list of the Company's
charity projects includes children's, educational and medical
institutions, sports teams, social charity funds, religious
communities, municipalities, veteran organizations.
The brightest
examples of such activity are the construction of first aid
fleet for Guarao indians living in the Orinoco
delta (Delta-Amacuro State, Venezuela), construction of a kindergarten
Jose Gregorio Hernandez in Caracas, Venezuelan capital, assistance
to municipal institutions of the Colombian department Boyaca,
support to the gymnasium in Astana, the capital of Kazakhstan,
organization of International music festival Tashkent Bakhori
(«Tashkent Spring») in Uzbekistan and a number
of other large-scale and interesting projects. This year LUKOIL
Overseas has implemented a new progressive social technology
- a program of social partnership with local population in
the Mangistau region of Kazakhstan, where a number of our major
assets is located. The grant fund is being used for most prospective
areas - support of small business, development of craft and
national culture, educational, cultural and ecological events
that are of great educational importance for children and youth.
We plan to expand this valuable experience to other countries
and regions of the company activity. LUKOIL Overseas spends
about $5 million per year on average for charitable and sponsorship
purposes.
Andrey
Kuzyaev, is Vice President of LUKOIL,and President of LUKOIL
Overseas Holding Ltd. Oil
of Russia magazine, quarterly edition
in English, has been published by Lukoil since 1998 and specifically
designed to provide coverage of oil and gas developments
in Russia, the CIS and Eastern Europe. Andrey
Kuzyaev, Vice President of LUKOIL, President of LUKOIL Overseas
Holding Ltd. Petroleumworld does not necessarily share
these views.
Editor's
note: This commentary was originally published by Oil of
Russia, No.4, 2007 . Petroleumworld
reprint this article in the interest of our readers.
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