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All for
a cause
Another pipe dream?
With a rise in estimated project costs,
TAPI faces an uncertain future 6
Houston-based
LOOP employees
kick off the
year with two
volunteering
events 3
The quest
for talent
LUKOIL Overseas
recruits the best
minds from a
student event
in the Russian
city of Perm 7
March 18, 2015
OIL JOURNAL
The world of LUKOIL’s international upstream projects
MEGA
DEAL
Winning the contract to build a new gas processing
plant in Uzbekistan cements LUKOIL Overseas’
decade-long presence as the Central Asian country’s
largest foreign investor 4-5
2
Business
Russia to ease FI rules
The Russian government is considering easing foreign
investment (FI) rules to allow investors access to the country’s
natural resources. Current legislation labels fields containing more
than 70mt of oil or 50bcm of gas as strategic and gives preference
to Russian companies. The changes will allow foreign companies to
obtain up to 25 per cent of such projects without special approval
and up to 49 per cent through a special government commission.
Insight
Editor’s
note
Dear LUKOIL ladies,
Please accept my most heartfelt congratulations for International Women’s Day.
From exploration to oil products and energy, your knowledge and experience play
an important role in the development of all of our company’s activities.
We will never stop admiring your professionalism and ability to inspire, support and
approach problems with the utmost delicacy and tact. We are grateful for your wisdom,
loyalty and capacity to stand shoulder to shoulder in the face of the most difficult
professional situations. Together we’ve been achieving great production and financial
results, implementing an efficient social policy at LUKOIL and contributing to the
development of the regions where we operate.
Stepping on
the gas
March 8 was a great occasion to express all of the kind words and thoughts that have
accumulated over the year. And by tradition, I’m sure all the men in LUKOIL’s teams in
Russia and overseas have done exactly that.
L
UKOIL Overseas recently
signed a contract for a
project that’s comparable
in size and scope to West
Qurna-2 — the development of the
Kandym gas field in Uzbekistan,
where the company has earned
the reputation of being the country’s largest foreign investor since
2004. In light of the latest deal,
we’d like to dedicate this issue to
the work LUKOIL has done in the
Central Asian state. Oil Journal reports from Tashkent on the deal’s
significance and how the company is helping to transform the local economy and communities in
terms of everything from education to job creation (p. 4-5).
Meanwhile, Danila Bochkarev,
Senior Fellow at Brussels’ EastWest Institute, offers his take on
how the planned TAPI pipeline
through Afghanistan will affect
all of Central Asia (p. 6).
As part of the company’s commitment to the long-term development of the communities
where it operates, former LUKOIL
Overseas President Andrey Kuzyaev offered guidance to entrepreneurs at his native Perm State
University in Russia. Oil Journal gives you a low-down on the
meeting (p. 7).
— Artem Zagorodnov
Editor-in-Chief: Artem Zagorodnov
Email: [email protected]
Address: LUKOIL Overseas Service BV,
Dubai Properties Group Building,
TECOM, Dubai
Website: lukoil-overseas.com
(digital version)
Publishing Director: James Hewes
Head of NPD: Edward Marr
Editor: Libini Joy
Chief Subeditor: Victoria Etherington
Deputy Chief Subeditor: Priya Mathew
Subeditors: Krita Coelho, Riaz Naqvi,
Tania Bhattacharya
Production Editor: Keith Langford
Designer: Maggie Bonner, Nicholas D’Souza
Account Group Manager: Vinod Thangoor
Tel: 04 406 7458; Mobile: 050 964 7009
Email: [email protected]
Published and printed by
Al Nisr Publishing LLC
Private circulation only
Oil Journal is LUKOIL Overseas’ official
English-language monthly newsletter.
Questions? Comments? Feedback?
Let us hear your voice!
[email protected]
All photos in the magazine by: LUKOIL Overseas
Archives, Corbis and Yana Ageeva
Hope you all greeted this day with a sunny spirit and kind thoughts, and here’s wishing
love, happiness, comfort and abundance in your homes.
Vagit Alekperov
President, LUKOIL
WE SHALE OPTIMISE
A section meeting of the Society of Petroleum Engineers organised by the Gubkin
Russian State University of Oil and Gas in Tashkent provided a great platform for
exchange of information between students, academics and industry professionals
B y V e n e r a Y a l a l o va | Oil Jou rn al
W
ith
the
recent
buzz
surrounding gas production
from unconventional sources,
shale field development was
chosen as the topic of discussion for the
fourth section meeting of the Society of
Petroleum Engineers (SPE) in Uzbekistan.
Organised by the Tashkent branch of
the Gubkin Russian State University of
Oil and Gas, the scientific and technical
meeting provided a great opportunity for
professionals, academicians and students
to exchange their views on the topic.
In his welcome speech, Denis Rozhentsev,
Deputy General Director for Operations at
LUKOIL Uzbekistan, said the SPE meetings
have been attracting increased attention
over the years.
A special guest at the event was James
Crafton, who was named Distinguished
Lecturer of SPE in 2008. Crafton holds a
The SPE meeting was a fruitful endeavour
in discussing current industry trends
PhD in petroleum engineering from the
University of Tulsa and is the founder of a
well stimulation school in Colorado. He has
authored several reports on evaluation and
improvement of the methods and practices
for oil and gas shale field production.
Crafton presented the Shale Well
Performance report at the meeting. It
covered theoretical aspects of hydraulic
fracturing modelling in a horizontal
well and properties of multifunctional
nanofluids that allow for control of
interfacial tension. He presented practical
results of shale well performance at the
Eagle Ford field in South Texas as well.
Another speaker at the event was
Rakhim Sidikhodzhayev, an honorary
academician of the Turon Academy of
Sciences. He spoke about the development
of shale hydrocarbons globally and
in CIS countries, as well as the main
exploration results and shale development
opportunities in Uzbekistan.
Following Sidikhodzhayev’s talk were
two presentations by the heads of LUKOIL.
Ignatiy Volnov, Head of Geophysical and
Gas Hydrodynamic Surveys, LUKOIL
Uzbekistan, presented a report titled Shale
Fields: Particularities, Objectives, Problems,
while Dmitriy Alexandrov, Head of
Geophysical and Hydrodynamic Surveys,
LUKOIL Uzbekistan, made a presentation
focusing specifically on environmental
issues related to shale gas production.
3
Mexico to announce possible
LUKOIL PSA
RIA Novosti quoted Juan Carlos Zepeda Molina, President Commissioner
of the National Hydrocarbons Commission in Mexico, as saying that
a decision on LUKOIL’s involvement in developing fields in the
Veracruz, Tabasco and Campeche regions via a production sharing
agreement would be made by May 15. Total reserves in these regions
are estimated at 687 million barrels.
E
nergy City of the Future is an enterprising urban planning competition
for middle and high school students
aimed at developing a vision for
Houston in 2050. Student teams researched
and presented their innovative concepts for
future forms of energy production and plans
for transportation, recreation, education and
health care that can enhance the city’s sustainability levels through energy efficiency,
environmental soundness, user-friendliness
and fiscal responsibility.
The teams showcased their models and
explained their vision and plans to a panel
of judges drawn from Houston’s energy industry. The judges reviewed the entries
E
LOOP
participants
ENERGY CITY OF THE
FUTURE COMPETITION
and assigned scores to all participating student teams.
“I was truly impressed by the detail, time
and creativity devoted by the young students
towards each project,” says Anastasia Ray,
Technical Assistant, Drilling Operations,
LOOP, who was one of the judges.
“The Energy City of the Future event shows
how important it is to give children the opportunity to learn, explore and create. I am very
proud to be a part of a company that reaches
out to the community, especially in the area of
Business
Insight
education. We are making a difference to not
just their lives, but our own.”
Another judge, Sonia Leynes, who is an
accountant at LOOP, says, “It was exciting to
have the opportunity to participate as a judge
and interact with the students. Their level of
sophistication and knowledge of the energy
sector was amazing.”
Twelve student teams from five different schools participated in the competition.
The LOOP group was assigned three middle
school student projects for judging.
One of the teams judged by LOOP, from
The Village School located in West Houston,
won the prize for the best overall middle
school project.
C ITY OF THE F UT U
Y
G
RE
NER
Ushering
in spring
Uzbekistanis can’t
wait to revel in the
spirit of Nowruz with
traditional music,
dance and crafts
Sonia Leynes Accountant, Finance
& Accounting Department | Jon Perez
AP Specialist, Finance & Accounting
Department | Veronica I. Woodruff Senior
Accountant, Finance & Accounting
Department | Anastasia Ray Technical
Assistant, Drilling Operations |
Nikki Kitagawa (not a LUKOIL
employee, but a friend of
Jon Perez)
By Timur Umarov |
O i l J ournal
T
he belief has been that the
more cheerful the celebration, the more bountiful
nature will be, making the
people of Uzbekistan revel in Nowruz
celebrations with traditional songs
and dances. Celebrated on March 21,
it is a state holiday in Uzbekistan. A
symbol of spring awakening, the festival marks the beginning of the planting season.
Since ancient times, Nowruz has
been celebrated with outdoor festivities, holiday fairs, horse races, and
dog and cock fights. The celebration
is marked with contests among singers, storytellers and wrestlers as well.
While expressing joy at the arrival of
spring, people also exchange gifts and
get involved with charities.
In keeping with the festive spirit,
LUKOIL Uzbekistan organises various
cultural programmes for the communities it serves. In the past, the company has organised cultural performances by clowns and mini circus shows
for students of Bukhara’s residential
schools for visually and hearing impaired children and Dehkanabad district’s schools in Gissar.
ALL FOR A
CAUSE
LUKOIL Overseas Offshore Projects in Houston
kicked off the year with two volunteering events
T
he employees of Houston-based LUKOIL Overseas
Offshore Projects (LOOP) undertook two volunteering
events this year. They volunteered as judges for the
finals of the Energy City of the Future competition
for students from Grades 5 to 12 on February 21, and lent
a helping hand during the Thursday Free Family
Night programme at the Children’s Museum
of Houston on March 5.
B y J o a n D o dd | Oil Jou rn al
LOOP
participants
EMPLOYEE VOLUNTEER
PROGRAMME
EM
N
PL
OY
EE
ine Houston-based LOOP employees, including Kevin Black,
Managing Director, and his wife
Keri Black, volunteered at the
Children’s Museum of Houston on March 5
to mark the beginning of the employee volunteer programme at the museum.
LUKOIL also has an ongoing corporate
sponsorship to help fund the museum’s
Thursday Free Family Night programme this
year. The event allows free admission to lowincome families from 5-8pm throughout 2015.
The company believes that having a yearround employee volunteer programme at the
museum will complement LOOP’s sponsorship, increase the company’s brand awareness
M
VOLU
NTEER PROGRA
in the Houston community and strengthen
employee collaboration. LOOP employees
will volunteer on a regular basis on Thursday,
Friday, Saturday, or Sunday all year.
On March 5, LOOP volunteers interacted
with children and their parents around the
exhibits, which included equipment for 3D
printing, building and soldering circuits,
rocket ship building, robotics and animation,
game development, and arts and crafts.
“I had a really outstanding evening on
Thursday,” says Ekaterina Silina, HSE Specialist, LOOP, who was one of the volunteers at
the event. “It was a pleasure to visit the Children’s Museum as well as to share that experience with little ones. They were so excited
ME
Kevin Black Managing Director, and his wife
Keri Black | Marat Sarsenov Subsea
Equipment Engineering Manager | Ekaterina
Silina HSE Specialist | Wendy Peña
Administrative Assistant for Corporate Services |
Priest Goss Senior Supply Chain Specialist |
Natalya Tukuser Executive Assistant
to Managing Director | Hongwei Zhu Senior
Geophysicist | Anastasia Ray Technical
Assistant, Drilling Operations |
Joan Dodd Public Relations
Manager
to discover this world and the wonderful possibilities of engineering in the building zone; I
had fun helping them construct flying ships. I
want to do it again for sure.”
Anastasia Ray, Technical Assistant, Drilling
Operations, who was also a volunteer at the
programme, adds, “The contribution to the
Children’s Museum of Houston by LUKOIL
gives low-income families the opportunity
to bring their children for a night of fun and
learning every week.
“Volunteering was a wonderful way to interact with both the children and their families, and experience their joy and excitement
first-hand. I look forward to volunteering
more in the future.”
Food for thought
O
ne of the main dishes
that’s cooked for Nowruz
is sumalyak. It is made
from flour and sprouted wheat
grain and sometimes flavoured
with spices.
It is believed that when you
try sumalyak for the first time,
you should make a wish and it
will come true. Singing songs
and sharing stories among people is customary while the dish
is being prepared.
Other popular dishes for
Nowruz include haleem (stew
with lamb, lentils and pounded
wheat), pilaf (rice cooked in
seasoned broth), shorba (lamb
soup) and kok samsa (meat and
vegetable pie).
4
Special
Report
Annual capacity
KANDYM
BY THE
NUMBERS
Gas wells
8.1 bcm
Well
pads
6
77
GAS OASIS
The recent contract to build the Kandym Gas
Processing Plant in Uzbekistan opens another
important chapter in the history of LUKOIL Overseas
T
he 1,600-kilometre border separating the Central Asian states of
Uzbekistan and Turkmenistan is
mostly desolate, marked by just
a few official crossings. Desert sand blows
across the flatlands as pallid harrier birds
circle overhead. Here, you get the impression of being as far away as geographically
possible from civilisation.
That’s about to change. On February 13,
LUKOIL and a consortium headed by Hyundai Engineering signed a contract in Tashkent
for the construction of the Kandym Gas Processing Plant, the largest foreign investment
project in the history of Uzbekistan. The
plant, located in the Bukhara region not far
from LUKOIL’s existing Khauzak-Shady field,
will have an annual capacity of more than 8
billion cubic metres (bcm) of gas and will
create no fewer than 2,000 permanent jobs.
“This is one of the largest projects in Central Asia,” says Oleg Vlasov, Director of the
Kandym project. “This will be the first gas
Pipelines
300+
km
processing plant in the history of Uzbekistan
that uses modern licensing processes. That
means we’ll get ideal gas product meeting
the most stringent international standards.
“This isn’t just a plant, it’s an entire gas
processing complex — by definition this includes everything from getting fluids from
the subsoil to creating a marketable good.
This means the project includes systems
for collecting, processing and exporting
gas products.”
The Kandym plant will receive gas from
six well pads, tapping a total of 77 individual
km
53
km
1,200
Permanent
jobs created
2,000
Railroads
55
wells. Construction will include a connection to the local energy grid by no fewer
than three high-voltage power lines, a 55-kilometre-long railroad, 53 kilometres of water
pipes, living quarters for the workers and
a road connection to the nearby highway.
More than 10,000 workers will be employed
during the peak construction period.
HSE practices
“Our priority as an operator is industrial
safety and environment protection,” says
Denis Rozhentsev, Deputy General Director
for Operations, LUKOIL Uzbekistan. “Only
after that comes production, realising our
investment and efficiency.”
A key challenge for the company will
be the highly lethal hydrosulphuric (H2S)
gas at Kandym. Although LUKOIL has had
experience in similar environments with
projects such as Tengizchevroil, this will
be the company’s first experience as an operator responsible for safety on a project of
this magnitude.
“The presence of H2S gas exceeds 4 per
cent. This requires higher safety standards,”
says Rozhentsev. These will include everything from additional safety criteria for
the testing of industrial equipment to special training for on-site staff and individual
H2S monitors.”
LUKOIL’s impact on local businesses in
Bukhara is already visible. “It’s comforting
that local contractors have reacted positively to our standards and are trying to learn
from us quickly,” says Rozhentsev.
No less significant are the company’s ecological efforts, where LUKOIL Uzbekistan
has stood out among the company’s assets
worldwide. The Khauzak-Shady field is located on internationally protected wetlands
and has therefore been subject to the most
stringent environmental standards, including the installation of bird-repelling devices
on power lines to minimise the effects on the
environment. Two years ago, visiting experts
from the US, Russia and Europe gave rave reviews for the company’s preservation efforts.
The company also holds regular fire drills
and other rescue operations with Uzbekistan’s Ministry of Emergency. “Our main accomplishment is not having a single safety
incident in the 10 years of work in Uzbeki-
The tech behind the talk
The Kandym project will
process natural gas from
77 individual wells
tapped at six different well
pads, which will feed into two
collection points that are, in
turn, linked through pipes to
the gas processing plant.
100+
Capacity of
living camp
km
RISE OF THE
By Fedor Klimkin | Oil Journal
Water pipes
Power lines
CONDENSATE
SEPARATOR
Gas is separated into
liquid and condensate
DEHYDRATE
Water is removed
from the gas
REMOVAL OF CONTAMINANTS
Gas is cleansed of acidic
components such as carbon
dioxide and hydrosulphuric acid
DEMERCAPTANIZATION
Gas is dried for transportation
through demercaptanization
Sulphur Unit
Sulphur is extracted from acidic
components for industrial use
Pipeline
Dry gas leaves the plant through
the export pipeline
INCINERATION
Remaining toxic gasses
are incinerated
KANDYM PROJECT
THROUGH
THE YEARS
stan,” says Rozhentsev. “Not a single spill or
environmental violation.”
Human resources
Although the contract territory of Kandym is uninhabited, the project’s impact on
the communities in Bukhara cannot be underestimated. Since the commencement
of operations in Uzbekistan, LUKOIL has
maintained an active relationship with the
country’s leading universities, including the
Tashkent branch of the Gubkin Oil & Gas
Institute and technical engineering schools
in Bukhara and Qarshi. Many graduates of
these universities go on to work for LUKOIL, which is committed to employing locals in 80 per cent of the positions available
at its production facilities. Kandym will be
no exception, explains Sergey Starostinsky,
Deputy General Director for HR and Organisational Development, LUKOIL Uzbekistan.
“We plan to hire up to 400 university graduates over the next two years.
“Our employees [in the fields in Kandym]
will live in comfortable, modern units. The
field camps will provide everything necessary for comfortable rest and recreation
after hours. This includes the actual living
quarters, cafeterias and athletic facilities.”
Talking about the challenges, Sergey Nikiforov, President of LUKOIL Overseas, says,
“Our assets in Uzbekistan are the most important component of LUKOIL’s strategy for developing its gas business… [Kandym] is comparable to West Qurna-2 in terms of complexity and
the level of investment. I’m sure [we] will meet
the challenge.”
— With inputs from Kirill
Borzaev and Ralif Nigmatullin
TOTAL
EMPLOYMENT
at construction peak
10,000
Thinking globally,
acting locally
1980
Stepan Gurzhiy, General Director, LUKOIL
Uzbekistan, on the second-biggest project
in LUKOIL Overseas’ investment portfolio
2004
H
Discovery of Kandym
gas fields
LUKOIL and Uzbekneftegaz
sign 35-year productionsharing agreement (PSA)
for the Kandym-KhauzakShady-Kungrad project;
LUKOIL Uzbekistan formed
2011
Hyundai Engineering
wins the tender to design
Kandym Gas Processing Plant
2014
Original PSA extended
until 2046
2015
Contract signed between
LUKOIL and a consortium
headed by Hyundai
Engineering for the
construction of Kandym
Gas Processing Plant
5
ow significant is the Kandym contract for LUKOIL
Uzbekistan ?
The contract value totals
$2.7 billion, and the Kandym Plant will be
processing 8.1bcm of natural gas annually
in order to obtain block and granulated
sulphur, stable condensate and purified
natural gas. All products willl comply
with international quality standards and
the Republic’s requirements.
The Kandym project ranks second
in the international investment portfolio of LUKOIL Overseas after the West
Qurna-2 project in Iraq, and is the largest
investment project in the modern history
of Uzbekistan.
What are the risks you expect in the
implementation of the project?
A large number of risks arise from
Kandym being a complex project. Safety
issues traditionally rank first in LUKOIL
projects around the world.
Primary attention is given to minimising industrial safety risks. We focus on
using the most stringent labour safety
standards, hold regular training sessions
and drills for our personnel, and set strict
requirements for our contractors.
In these conditions, one of the key
aspects is the professionalism of all
parties involved in the project. Therefore, LUKOIL Uzbekistan places special emphasis on the following: hiring
the most experienced and qualified
contractors, employing a highly professional workforce and promoting
advanced best practices.
We appreciate the support of the state
authorities and local municipalities in
this regard.
How would you describe LUKOIL
Overseas’ operations in Uzbekistan
over the past 10 years?
The PSA for the Kandym-KhauzakShady project was signed in July 2004.
LUKOIL Uzbekistan Operating Company
was founded a month later. That’s when
the first field operations began. The first
production complex, the Khauzak-Shady
area in the Bukhara region, was started in
November 2007. In a year’s time, this facility reached target gas production levels.
Last November, a booster compressor
station was started at the Khauzak block.
This high-tech facility is the first production unit of its kind to be used in Uzbekistan’s gas industry. As of early 2015, the
accumulated hydrocarbon production in
Uzbekistan has reached 26bcm of gas.
These years have marked the
beginning of a path towards major
future successes.
How is the company contributing
to Uzbekistan’s development? How
will the Kandym project help in
this regard?
LUKOIL’s investments in Uzbekistan
have exceeded $3.5 billion, while the
state revenue amounts to more than
Stepan Gurzhiy, General Director,
LUKOIL Uzbekistan
$1.8 billion. Tax obligations since the production start date have been fulfilled to
the tune of more than $1.5 billion.
As of February, LUKOIL Uzbekistan
Operating Company employs about 1,600
people. Of the total headcount, 420 people work at the Khauzak field, 340 at Gissar and 130 at Kandym.
In Uzbekistan, LUKOIL is involved in
charity activities in areas such as education, health care, culture and sports.
Sponsorship and charity projects are actively implemented in operational areas.
Special attention is given to supporting people with disabilities, arranging
holidays for day schools and residential
institutions for children with special
needs, supplying drinking water to orphanages and [said] residential schools,
and providing social assistance and support for local communities. Since the
commencement of its operations, the
company has implemented sponsorship and charity projects in Uzbekistan
amounting to more than $10 million.
Moreover, we are doing our best to use
local resources. It should be mentioned
that the PSA protects local manufacturers (their share should not be less than
60 per cent of the total share of goods,
works and services) and future employees of the Kandym plant. About 80 per
cent of the staff we hire and train has to
be local personnel.
We already have long and fruitful relationships with many of the country’s design institutes. Among the major ones are
UzLITIneftegaz, Sredazenergosetproekt
and Boshtransloiyiha. And our future
cooperation plans would include leading local organisations such as National
Holding Company (NHC) Uzbekneftegaz,
State Stock Company (SSC) Uzbekenergo,
State Stock Railroad Company (SSRC)
Uzbekiston Temir Yullari and others.
The project’s implementation in Uzbekistan will create more than 2,000 jobs
and employ over 10,000 workers at various facilities during the peak construction period.
6
Industry
Voices
Kazakhstan to optimise
Tengiz oilfield
Kazakhstan’s Ministry of
Energy issued a statement
saying it plans to optimise
investment into the Tengiz
oilfield, which currently
accounts for almost
one-third of the Central
Asian nation’s output.
Investment into the field
is expected to total
$38 billion, which will allow
the project’s stakeholders
to raise annual output to
38.6 million tonnes from
the current 26.5 million
tonnes. LUKOIL owns
5 per cent of TCO.
Call for anti-crisis measures
LUKOIL President Vagit Alekperov called for a series of anti-crisis measures for
the oil industry in a letter to Russian President Vladimir Putin, which he wrote
with other top Russian oil executives. The proposals include a reduction in the
non-tax burdens oil companies face in Russia in the form of environmental fines
and other payments. The executives asked the President to delay a planned
law that would require mandatory liquidation funds to be set up by energy
companies to cover the costs of an environmental catastrophe until 2018.
ANOTHER
PIPE DREAM?
TAPI faces an uncertain future with the recent oil price fall, ambiguity regarding
transit via Afghanistan and an increase in the estimated project cost
tricity demand. Gas-based generation is
also significantly cheaper than fuel oil or
diesel, often used to produce electricity in
India and Pakistan.
acked by the Asian Development
The most efficient way to address the
Bank (ADB), the Trans-Afghanienergy deficit in South Asia is, therefore,
stan Pipeline (TAPI) aims to exbased on the construction of gas-fired
port up to 33 billion
power plants. Gas is
cubic metres (bcm) of natuabundant in neighbourral gas through a proposed
ing countries such as
pipeline from Turkmenistan
Iran, Qatar and Turkmenistan, but the energy
to Afghanistan, Pakistan and
reality on the ground is
India. The promise of TAPI
often shaped by obstawas based on the growing
cles, which overweigh
energy deficit in South Asia,
the advantages that geohigh hydrocarbon prices and
An increase in the
graphical
conditions
an abundance of natural gas
estimated cost
offer. Iran is still under
reserves in the neighbouring
of TAPI
sanctions, Afghanistan
country of Turkmenistan.
remains unstable and
There is a need for both
only Qatar offers new hopes with cheapIndia and Pakistan to find long-term sustainable solutions for their ever-growing
er oil-linked LNG supplies, which could
energy demands. A shortage of supcounter-balance the pricing advantages
ply, especially for power generation, is
offered by TAPI.
slowing these two countries’ economic
Gas as the fuel of choice seems to be
growth considerably.
under (a temporary) threat as well. Lower
In South Asia, natural gas is rapidly
oil prices offer little incentive for South
gaining importance as the key fuel for
Asian energy producers to switch from
power generation. Gas-based power genfuel oil- or diesel-based power generation
eration plants are more economical to
to natural gas. For instance, gas has traditionally dominated Pakistan’s thermal
build than alternatives such as nuclear,
generation. However, stagnation of dohydropower and coal-fired plants. Gasmestic production and increased compefired combined-cycle turbines are flexible
tition for gas from the country’s transport
and able to respond quickly to peak elecBy Danila Bochkarev
Special to Oil Journal
B
$2.4
billion
Lower oil prices offer little incentive for South
Asian energy producers to switch from oil- or
diesel-based power generation to natural gas
Sakhalin Energy
Consortium launches
a new variety of oil
The Russia-based Sakhalin
Energy Consortium,
consisting of Gazprom,
Mitsui, Royal Dutch Shell
and Mitsubishi, is launching
a new blend of tradable
oil called Sakhalin Blend.
It is a mix of its existing
Sakhalin-2 brand with
condensate from Gazprom’s
Kirinskoye field. According
to Oilnews.kz, the company
has shipped four tankers
of Sakhalin Blend at $2-$3
to some markets already.
A map of the proposed route of TAPI
sector and fertiliser producers have led to
a considerable decline in the usage of gas
for energy production in Pakistan. However, the sharp rise in power generation
costs has increased the appetite of companies to switch back to gas. But with the fall
in oil prices, there is a risk that this trend
might reverse and decrease Pakistani energy companies’ commercial interest in
imported LNG or pipeline gas.
A combination of factors such as the
oil price fall and uncertainty about transit via Afghanistan is likely to delay the
launch of the TAPI further. The estimated cost of the gas pipeline has increased
from $7.6 billion to $10 billion, and the
estimated price based on oil-linked formula dropped from $10-$11 per MMBtu
($360-$380 per 1,000cm) to $7 per MMBtu
($250 per 1,000cm). While the price range
of $6 per MMBtu ($220-$230 per 1,000cm)
on the Turkmenistan-Afghanistan border is
acceptable for Turkmengaz, it’s still unclear
who will lead and finance the TAPI project.
According to the agreed timelines, the selection of the consortium leader should be
finalised before the end of October. Needless to say, the leader has to have sufficient
financial and technological clout to lead the
project. An increase in the cost of the pipeline and decreased gas prices have reduced
the interest of major players in TAPI.
Furthermore, Turkmenistan’s legislation does not allow the granting of largescale onshore concessions/PSAs to foreign companies, which, in turn, reduces
their interest in TAPI. Granting access to
onshore deposits to the consortium leader
might help to choose an appropriate candidate. Alternately, Turkmenistan can lead
the project directly or via Turkmengaz
with the help of an international consortium. A trans-Afghan energy bridge could
bring peace and stability to the conflictridden country. In fact, all neighbouring
countries, including Turkmenistan, have a
vital interest in a stable Afghanistan.
— The writer is a Senior Fellow at the
EastWest Institue in Brussels
LUKOIL Uzbekistan
commended for fire safety
Following a successful series of drills during its Fire Safety Month,
LUKOIL Uzbekistan’s Health, Safety and Environment team has been
awarded first place for protecting socially significant objects from fire
in the city of Tashkent. Meanwhile, the company’s firefighters at
the Khauzak gas production facility received third place among
professional teams in the Bukhara Region.
7
Corporate
Responsibility
Quest for talent
LUKOIL Overseas recruits the best and brightest minds from more than
50 Russian universities at a student event held in the city of Perm
LUKOIL sets record in
horizontal drilling
Intense competition among graduates compels LUKOIL to adapt a smart selection process
B y N i ko l ay K a r p u s h i n
and
W
M i l e n a M i l i c h | Oil Jou rn al
e’ve studied deserts, high mountains and oceans, but the key to
our company’s success is people,
Andrey Kuzyaev, Advisor to the
President of LUKOIL (and former LUKOIL
Overseas President), told a packed auditorium of students from more than 50 Russian
universities. He delivered the speech as part
of LUKOIL Overseas’ conference, The Oil &
Gas Sector: Development Tendencies and
Perspectives, held at Kuzyaev’s native Perm
State University on February 26 and 27.
Kuzyaev’s keynote speech at the plenary
session focused on the history of LUKOIL’s
international upstream expansion and the
secrets to its success. “Oil reserves are ultimately discovered by people,” he said. “We
want to attract highly qualified, ambitious
employees who have a desire to change
the world.”
The event saw enthusiastic participation
from the student community, with the recruiters collecting more than 830 applications. And the event website had more than
5,800 unique visitors.
The first day was dedicated to discussion
on the latest trends in the energy sector, with
participants treated to master classes by LUWorking with the
youth is the most
appealing option for
LUKOIL Overseas to
renew its workforce.
A young specialist
begins his job with a clean slate,
so he’s most able to embrace
the company’s corporate culture.
Student conferences allow us to
attract the best young minds. And
this one was no exception: I noted
three to four students capable
of entering the ranks of Russia’s
business leaders.
— Victor Volkov, Head of
Macroeconomic Analysis,
LUKOIL Overseas
10
teams (for
the business
game)
2
days
50
universities
KOIL Overseas experts on geology,
THE
production, economics and planning.
The soon-to-be graduates also had the
chance to interact with experts and
learn more about opportunities from
works
applications
LUKOIL’s HR representatives.
NUMBERS research
distributed
from
28
cities
On the second day, a group of
60 lucky participants got to experience what it’s like to be a top manager at
LUKOIL Overseas. The chosen particitraffic to the
pants had to take part in a strategic business
event website
game as part of several cross-functional teams.
presenters
After passing several stages of the selection
833
BIG
60
Students at the conference also got
internships at LUKOIL Overseas’ key assets
Any company with
the goal of operating
in global centres of
energy production
needs to work with
young people. At
LUKOIL Overseas, we not only set
the bar high, but raise it higher
each year. Such conferences
offer a great opportunity for
the company to recruit the best
students. It’s always nice to
get a feel of how the new
generation lives and know what
its priorities are.
— Marat Mukhoryamov, Head
of Well Operations Support,
LUKOIL Overseas
240
5800+
process, the most active participants were rewarded with internships at key company assets across
the world.
“The Perm conference completely
changed my future,” recalls LUKOIL
intern Iskander Mukhametzyanov of Ufa
State Petroleum Technological University.
He participated in last year’s event. “I won
a prize, which gave me a study grant for
France’s IFP School and the chance to do a
career-changing internship.”
The conference
convinced me
that regardless
of any crises, any
successful oil and
gas company has
to develop its young workforce.
The 60 students chosen from
universities across Russia
demonstrated their intelligence
during the event. I definitely saw
future geologists who will be
searching for hydrocarbons in the
Arctic, deepwater offshore, shale
and other difficult conditions.
— Vitaliy Bochkarev, Head
of Reserve Estimation,
LUKOIL Overseas
LUKOIL-Nizhnevolzhskneft
has established a new
world record in horizontal
drilling with a significant
bottom displacement.
Well No.108, drilled from
an offshore ice-resistant
stationary platform at
Yuri Korchagin field in
the Caspian Sea, went
down 4,908 metres in the
9.5-inch section, in one
run, without any tripping.
I think the new
method of recruiting
young talent is great.
It’s useful both for
students, who get
a feel for the level
of professionalism expected of
them in the real world, and for
the company. We get to analyse
the candidates in a practical
setting with limited time for
problem solving. I’m convinced
that in a few years, some of these
participants will be employees at
LUKOIL’s worldwide assets.
— Sergey Ermachkov, Head
of Budget Consolidation,
LUKOIL Overseas
US judge rejects BP’s
bid to reduce $13.7 b
oil spill fine cap
A federal judge in New
Orleans has rejected
BP’s bid to cap the
fines it must pay for
the 2010 Gulf of Mexico
oil spill at $9.57 billion,
one-third less than the
amount ($13.7 billion)
prosecutors are seeking.
US District Judge Carl
Barbier ruled that BP
could pay a maximum
fine of up to $4,300 for
each barrel of oil spilled.
8
Global
Right on
target
LUKOIL Overseas
meets 2014
targets ahead of
schedule 2
Lord of
the rinks
Young specialists shine
Promising talent gets the chance to share
the stage with industry luminaries 7
Why this holiday
season is a great
time to visiit
Russia’s capital 8
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December 29, 2014
OIL JOURNAL
The world of LUKOIL’s international upstream projects
Oil’s new
digital
priority
To gauge and engage
Why employee engagement is
critical to the long-term success of
the O&G industry 3
Upstream
projects are
now banking on
technology to
save costs 6
The many charms
of Vienna
History and glamour walk hand in hand
8
in a city known for its art and culture
November 20, 2014
OIL JOURNAL
The world of LUKOIL’s international
upstream projects
OIL JOU
RNAL
The worl
READY
FOR
d of LUKO
2015
IL’s inter
natio nal
upstr eam
proje cts
January
31,
2015
EVA
BLACK DING
From launching the largest
greenfield in the Middle
East at Iraq’s West Qurna-2
to drilling the company’s
first exploration well in the
EU, 2014 has been a year
of milestones for LUKOIL
Overseas 4-5
SWANS
Risk managem
ent
better rewa for
rds 6
Between
space
and deepwa
ter
Apo
llo 13
Fred Haise astronaut
on
from oute threats
r space 7
GLOBAL
Perspective
SPOILS
Sergey Nikiforov has
as President of LUKOIL Overseas,
As Andrey Kuzyaev steps downhis predecessor, whose 14-year legacy saw the company
the advantage of learning from of success in its international upstream business 4-5
achieve stratospheric levels
CHANGING
DYNAMIC
S
Even with
crud
slipping dras e prices
LUKOIL CEO tically,
Vagit Alek
pero
believes that v
the
company
can optim
ise
costs and
productivity
without havi
resort to job ng to
cuts 4-5
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wherever you are in the world. To get
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to your inbox, write to
[email protected]
Shale revo
lutio
energy prod n challenges
ucers 3
Photo of the month
T
his photograph of a worker cleaning the exterior of one of the two
golden towers that flank the presidential palace in Kazakhstan’s capital
of Astana was taken by Dubai-based
Hydrodynamic Research Engineer,
Alexey Volpin. Astana is one of the
world’s youngest capital cities dotted
with numerous buildings sporting contemporary architecture. The city will
celebrate its 17th anniversary this year.
LUKOIL has been operating in Kazakhstan since 1995.
Winning shot
LUKOIL employees who are adept with
a camera are welcome to send photographs snapped in any of the countries
we operate in to
[email protected].
Beyond the office
Continuing our series
on employee hobbies,
we feature Dubai-based
photographer Shukhrat
Gafurov and his inspiring
pictures in this issue
E
R
U
T
PIC
T
C
E
F
PER
Do you have a talent or hobby that you’re proud of? Maybe you’re into skiing, handicrafts or orienteering, or have exotic animals as pets?
Whatever it may be, send pictures with a brief description to [email protected] to share your talent with LUKOIL Overseas
I
t was a coincidence that this Dubaibased Shift Supervisor at LUKOIL’s
Data Gathering Centre got interested in photography the same year
(2007) he joined LUKOIL Overseas at the
Khauzak-Shady field in Uzbekistan. Five
years later, while working at the company’s headquarters in Moscow, Shukhrat
Gafurov invested in a professional camera. Soon, his hobby became a dominant
factor in his life.
This January, Gafurov travelled to
Socotra island (often compared to the
Galapagos for its ecosystem) in Yemen to
document the lives of the people there.
The trip was arranged by an ecotourism
company, and had participants living in
tents and travelling to a new location every
day. “We were worried about going there
[because of the geopolitical situation], but
the island turned out to be completely
peaceful and friendly,” says Gafurov.
For more photos from his trip to Socotra, visit http://bit.ly/1BXVSor.