Gazprom and Lukoil to Jointly Develop Tsentralnoye

Gazprom and Lukoil will set up a 50/50 venture to develop the Tsentralnoye field. Lukoil has been exploring Tsentralnoye and three other fields in Russia's Caspian sector since 2000, estimating possible crude oil reserves at one billion tons. However, Lukoil said this year the fields contained a total of only 60 million tons of oil but also 336 billion cubic meters of natural gas, roughly two thirds of Europe's annual gas consumption.

This news was disappointing to analysts, who said it would be difficult for Lukoil to find consumers for gas in the land-locked Caspian region and questioned its investment of more than $300 million in offshore exploration.

Lukoil is the only company to conduct offshore exploration in the Russian sector of the Caspian Sea, where no important oil reserves have been discovered so far, unlike in neighboring Azerbaijan and Kazakhstan.

The agreement between Lukoil and Gazprom may also face complications due to a deal in May between Russia and Kazakhstan, which agreed to divide their sectors of the Caspian Sea and jointly work on disputed fields, including one in the Kazakh sector and two in Russia. Those fields include Tsentralnoye, which means Lukoil has to cede 50 percent to Kazakh firms.