Lukoil Hopes to Begin Drilling on Dostyk Field Next Year

Lukoil plans to wrap up an agreement with the Kazakhstan government on developing the Dostyk offshore field in the Caspian Sea by the year-end, chief executive Vagit Alekperov said Monday.

Alekperov said after a meeting with President Nursultan Nazarbayev: "We hope that in the next two to two-and-a-half months, KazMunaiGaz and ourselves will prepare a contract" earmarking part of the block in question for exploration and production work, and the other part just for exploration. "If everything goes according to plan, we hope that the contract may be signed in the first quarter of next year," Alekperov said, adding that Lukoil would have "unique drilling equipment" allowing to start drilling next year too.

Lukoil and Kazmunaygas each have 50% interests in Dostyk. Alekperov said Lukoil may invest up to $3 billion in the project overall, although it wasn't clear whether this included any obligation to "carry" KazMunaiGaz through the exploration phase. A new law being prepared for the Kazakhstan parliament at present envisages that private-sector contractors will have to finance KazMunaiGaz's share of exploration costs, with reimbursement coming only in the case of a commercial discovery.

Lukoil has invested approixmately $1.5 billion in Kazakhstan to date, notably through its 15% interest in gas and condensate field Karachaganak, its 2.5% indirect interest in the consortium developing the Tengiz oilfield and its 50% interest in the Kumkol oilfield. It also has a small stake in the Caspian Pipeline Consortium.