Lukoil-Perm Makes Profitable Acquisition

LUKOIL-Perm, the operator of Russian projects of LUKOIL Overseas, was declared the winning bidder at the auction held by the Ministry of Natural Resources of Russian Federation.

The auction was held in Perm Region, where all of the oil fields offered at it are located. The auction was one of the first held after the adoption of amendments to the federal law on the subsoil this fall.

Specialists of LUKOIL-Perm identified just one of the seven fields open for bidding, Alexandrovskoye, as economically attractive. LUKOIL-Perm won the right to develop the field in stiff competition.

The Alexandrovskoye field is located in Kungur District (southern part of Perm Region). Exploration operations began there in 1991, with the discovery registered in 1999. Two exploration wells were drilled on the field.

Availability of developed infrastructure in the Kungur oil production area (LUKOIL-Perm's production sop No.10) will enable the company to put the field on pilot production at minimal cost as early as 2005, providing commercial grade low sulfur, low tar, low paraffin crude. Peak production of 70,000 barrels per year is planned to be achieved as early as 2006.

The field's proven reserves are 1.8 million barrels. At $1.2 per barrel their acquisition cost is quite low given the current competitive situation on the petroleum market.