Lukoil #342 (July-August 2018)

LUKOIL REPORTED TO SHAREHOLDERS Social unrest didnt disrupt output from the major oil fields. On June 21, PJSC LUKOIL General Shareholders Meeting took place in Moscow. It approved Companys Annual Report for 2017. KEEPING UP WITH IRAQ I n July unrest across southern Iraqi cities gathered pace. Protesters have blocked the access to major oilfields, attacked government buildings, branches of political parties and stormed the international airport in the holy city of Najaf. . However, troubles have not disrupted crude shipments from the region. According to senior oil officials, Iraq exported an average of 3.566 million barrels per day from its southern oilfields in July. Crude exports account for 95 percent of state revenue and any disruptions could badly damage its economy at a time when Iraq needs tens of billions of dollars to rebuild after the three-year war with Islamic State. The unrest is piling pressure on Prime Minister Haider al-Abadi, who hopes to serve a second term once Development of priority projects allowed Company to increase hydrocarbon production in 2017 by 2.5% to 2.3 mln bpd, raising share of high-margin barrels to 21%. The main 2017 achievements in the E&P segment were: Launching major production facilities at the Gissar cluster of fields and Phase 1 of the Kandym gas processing plant in Uzbekistan (see OJ 08(338), September 2017, 11(341), December 2017) Discovery of the large oil field Eridu at Block 10 in Iraq (see OJ 01(331), January 2017) Obtaining the right for exploration and development of Block 12 in the Gulf of Mexico (see OJ 09(339), October 2017) S peaking to the shareholders, PJSC LUKOIL President Vagit Alekperov outlined that the major achievement in 2017 was anupdate ofCompanys long-termstrategy. The new strategy is based on the conservative price scenario (50 USD per barrel) and bets on qualitative not quantitive goals: efficiency, cutting unit costs, ensuring FCF and ROACE growth. Instead of dynamic overseas expansion, LUKOIL will focus on the sustainable organic production growth in the traditional areas, using leading edge technology inparticular. Companywill still look into new projects outside Russia in case they are profitable enough. In E&P segment, LUKOIL bets on priority projects that allow to rump up high-margin production volumes. These projects combine lowunit costs with direct access to themajor export destinations. politicians form a new government following aMay 12 parliamentary election. In a meeting with government officials carried on state television, al-Abadi promised to allocate funds for water and electricity in Basra, once dubbed the Venice of theMiddle East for its network of canals. We will not allow anyone to tamper with security and order by encroaching on public, private and government institutions and also economic institutions, military spokesmanBrigadierGeneral Yahya Rasool told a news conference. Reuters LUKOIL operations were not affected by recent unrest in Southern Iraq. During crisis LMEL top managers and security team have been closely working with Iraqi military and police forces to ensure safety of the Companys personnel and production facilities. Company got support from Iraqi officials, who recognized its key role in the countrys economic development. Even more important, it got full support from its Iraqi employees, who continued performing their duties in spite of challenging environment. Shell has formally handedover control of the 230,000 b/d Majnoon oil field to Iraq's state-run Basra Oil Company, marking the end of Shell's eight-year involvement in the project as well as its active oil investments in Iraq. The company said it plans to focus on developing its gas joint venture. Shell handed over Majnoon to BOC EXPLORATION AND PRODUCTION Proved hydrocarbon reserves Russia Russia International Progects International sales Europe Refining throughput Hydrocarbon production Retail Sales REFINING AND SALES In the lead-up to Shells exit, Iraqi Ministry of Oil signed a two-year contract with Anton Oilfield Services and Petrofac to operate the field on behalf of BOC. Iraq plans to boost output from the field to 450,000 bpd in three years, oil officials said. 16.0 1.4 14.2 2.3 88% 64% 71% 87% 12% 36% 29% 13% bln BOE mln bpd mln ton mln BOE/day 2 News

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