Lukoil, Russia’s second-largest crude producer has started talks on potentially acquiring stakes from Brazil’s Petrobras in two Nigerian fields, where it holds a 16 percent stake in the Akpo field and a 13 percent stake in the Agbami field along with other assets in Iran, Iraq and Mexico as it readies to expand its upstream portfolio and replace its reserves to maintain crude production levels.
Vagit Alekperov, the president of Lukoil told S&P Global Platts, an energy sector independent resource that discussions have just begun, and it is too early to give details or say whether that will happen.
“Yes, we are looking today at the projects that would allow us to compensate for the volumes we produce,” Vagit Alekperov further said, “Our own geological exploration allows us to replace about 70%-75% of that production.
The remaining 25%-30% is a question of acquisitions.” Lukoil already produces around 1.65 million barrels per day, but the company now sees great potential in its existing and potential new African assets among others around the world. “We are studying all possibilities.
For us today, outside of Russia, the economic indicators have to be higher than we have had here in Russia. When I say higher, I mean 15-20 percent. In Nigeria, they are so-so,” he said. Unlike Lukoil’s other African assets, Akpo and Agbami are already producing fields, which would mean an immediate return on investment.
But a source with knowledge about the matter, told BusinessDay the deal if it works could be more about Petrobras trying to cut risks in Nigerian than a signal that investors are falling over themselves to come into Nigeria. However, Petrobras’ motivation to sell is very strong.
The company on January 3 agreed to pay $2.95 billion to settle a U.S. class action corruption lawsuit, in what was said to be the biggest such payout in the United States by a foreign entity. Petrobras denied any wrongdoing in the deal, which was one of the largest securities class action settlements in U.S. history.
With the settlement, it will pay out more than six times what it has received so far under a Brazilian probe into bribery schemes that involved company executives and government officials and will constrain payment of dividend that has been stalled since 2014.
Lukoil is already working on a project with Chevron in Nigeria where the two found commercial crude reserves in 2015. “We are at the teaser stage for the opportunity regarding the process of divesting 100 percent of our interest in Petrobras Oil & Gas B.V. (POGBV), a joint venture formed by us (50%), BTG Pactual E&P B.V. (40%), and Helios Investment Partners (10%).
We are leading the sales process,” Petrobras had said. Petrobras holds stakes in two world-class deepwater blocks in Nigeria, the Akpo and Agbami production fields, the Egina field, which is in its development phase and where production is scheduled to begin in late 2018, and the Preowei discovery, which is currently under evaluation.
The giant Akpo and Egina fields are operated by Total, while the Agbami field is operated by Chevron. The appropriation of Petrobras’ net reserves totals approximately 204 million barrels. Current production there stands at 48,000 barrels per day, and it is expected to reach about 75,000 barrels per day until 2019.
Petrobras is planning total investments of US$74.5 billion, with 81%, or approximately $60.3 billion, going toward E&P in its 2017-2021 business plan, which called for $74.1 billion in total investments and 82 percent toward E&P, or $60.6 billion.
The Brazilian firm broke down the $60.3 billion E&P budgeting as follows: 77 percent toward production development ($46.5 billion), 11 percent toward exploration ($6.6 billion), and 12 percent toward infrastructure ($7.2 billion). In regards to operating costs, Petrobras said it will continue its reduction efforts, and plans to spend $136.8 billion on operating expenses.
It will also continue with its partnerships and divestment plans. Petrobras said the goal for 2017-2018 is $21 billion in divestment.
(BUSINESSDAY)
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