No. 1, 2008

Oil of Russia magazine talks to Ramil Shaikhutdinov, Regional Director of LUKOIL-Overseas for the Middle East and Africa

Today, JSC LUKOIL is producing oil in 12 countries on four continents, with the Middle East and Africa having a special place in the strategy of its overseas upstream sector’s development.

Q: What’s the extent of LUKOIL’s operations in the Middle East and Africa as of now?

A: The Middle East is the world’s largest oil- and gas-bearing area. Enormous reserves of oil and gas, both already being developed and still under exploration, are concentrated there. Besides, the region is the world’s leading oil exporter. That is why each oil major seeks to gain a foothold there.

Speaking about Africa, many African countries, along with those of South America, have a substantial oil and gas development potential. Chinese, Indian and Indonesian energy companies are becoming an ever more conspicuous presence in the African market along with Western ones.

LUKOIL has become the first Russian oil company to venture out of the CIS limits – back in 1995, the Company bought a stake in the Egyptian oil concession of Meleiha in the Western Desert. North Africa has been one of the Company’s key “worksites” since then. In 2001, LUKOIL, represented by its subsidiary LUKOIL Overseas, received a concession to develop the Weem oil field near Hurghada. Incidentally, that is one of the Company’s most profitable oil development projects.

LUKOIL Overseas is making every effort to expand the scale of the Company’s operations in that region. Today, LUKOIL Overseas is running oil development operations in Saudi Arabia, Cote d’Ivoire and Egypt and has opened representative offices and branches in Iran, Iraq, the UAE, Egypt, Algeria and Libya.

Q: Any news from the Rub al Khali (Saudi Arabia) desert where the Company is drilling exploratory wells?

A: The Block A geological survey project under way in Saudi Arabia is among the Company’s most promising ones in the Middle East, and Saudi Arabia is one of the most influential countries in the Gulf area. A successful realization of the project will make for a more active expansion into the neighboring countries’ markets. Operating in the Kingdom of Saudi Arabia, besides LUKOIL, are joint ventures involving China’s Sinopec, Royal Dutch/ Shell, France’s Total, Spain’s Repsol YPF and Italy’s ENI. LUKSAR, a joint venture formed by LUKOIL and the Saudi Aramco company, surpasses all the others in exploration effort efficiency – the total footage of the boreholes it has drilled is comparable to the combined performance by the other three JVs. The opening of a hydrocarbon field in one of the drilled-out closures – Tukhman – was announced in February 2007. The closure is now being evaluated jointly with government authorities. Geological survey revealed over 10 promising features, including those in fields practically unexplored until recently.

Q: Does the Company consider the possibility of participating in any new projects in Saudi Arabia?

A: The Company’s dynamism and its successful exploration work have put us in the good books of the Kingdom’s government authorities and of our key business partner – the Saudi Aramco national oil and gas company. Therefore, I hope that we shall launch new joint projects with our Saudi partners before very long in Saudi Arabia as well as in third countries.

Q: In February 2007, LUKOIL and Qatar Petroleum signed a Memorandum of Understanding in matters of cooperation in the exploration, development and rehabilitation of oil and gas fields. What can you say about Qatar Petroleum as a prospective partner?

A: We are bent on using every opportunity to build up the Company’s business in that region. LUKOIL Overseas has established good business relationships with many government-owned companies of the Persian Gulf countries, specifically with Qatar Petroleum. Hopefully, our intentions will be translated into practice shortly enough.

Q: How far the realization of LUKOIL Overseas’ shelf development projects in Western Africa has advanced?

A: This work is proceeding successfully and strictly to schedule. In the fall of 2007, LUKOIL Overseas gave a thorough study to the basic geological characteristics and producing potential of the CI-205 hydrocarbon block found in the Guinea Bay off the Republic of Cote d’Ivoire’s shore. The 2,600 km CI-205 block is located on a deep-water Atlantic shelf 100 km away from Cote d’Ivoire’s shore. Geologically, it is part of the Tano basin proved to contain commercial reserves of oil and gas. A joint venture was formed to explore and develop the block by LUKOIL Overseas (equity stake: 63%), Nigeria’s private company Oranto Petroleum International (27%) and the PETROCI Holding National Oil and Gas Company of Cote d’Ivoire (10%). Previously, the block had undergone an extensive 2D and 3D seismic survey using a manned research vessel from which ecologists selected and studied five points located in various parts of the vast block. In each point, seawater samples were taken from various depths for laboratory tests, ambient air condition checked, the area’s seasonal weather situation and climate studied, flora and fauna (seaweeds, fish, squid) specimens examined, environment health indicators brought out and the ecosystem’s food chain ascertained.

The offshore investigation program has been carried out as planned and now, as part of preparations for the drilling of a deep exploratory well, the laboratory stage of the block’s ecology study is in progress and a report on drilling operations’ environmental impact is being prepared.

Q: Does the Company contemplate further expansion of its presence in Africa?

A: It certainly does. I believe that any line of LUKOIL’s activity in Africa and its any achievement there do not only enhance the image and stimulate the progress of the Company proper, but add to Russia’s influence in the region as well.