As Russia readies to raise its economic profile in Africa, so also many Russian companies want to get on board. Lukoil, one of the Russia’s biggest oil companies, plans to continue an intensive development of oil fields in West Africa in 2019. Last December 2017, it listed Cameroon, Egypt, Ghana and Nigeria among its key priority international projects.
Lukoil’s President and Chief Executive Officer, Vagit Alekperov, while visiting Abu Dhabi in November, informed publicly that his company was looking for new projects in West Africa, and particularly, it was in negotiations with Italian Eni the possibility of entering into a joint project in Nigeria.
In fact, it was reported already four year ago, it joined the offshore deepwater project at OML-140 block on the Nigerian shelf. The block with an area of more than 1.2 thousand km2 is located in the Nigerian waters of the Gulf of Guinea, 135 km away from the coast. Water depth at the block ranges from 1.2 to 2 thousand meters.
Like many Russian companies, Lukoil has had a long history, going forth and back with declaration of business intentions or mere interest in tapping into oil and gas resources in Africa.
Lukoil’s plans to expand on the Gulf of Guinea, especially that excluded the probability of some additional acquisitions of upstream projects in the waters of other West African states. That related to countries such as Cameroon, Nigeria, Ghana, Cote d’Ivoire, Sierra Leone and Guinea, according to Lukoil Overseas’ annual report.
According to information obtained, Lukoil began its exploration activity in Ghana in 2010. As a whole, it explored seven blocks, but only two of them, which had commercial reserves of hydrocarbons, have been selected for further development.
But, multiple factors have paralyzed its foreign investment on the West African coastal countries. Besides technical and geographical hitches, Lukoil noted explicitly that “the African leadership and government policies always pose serious problems to operations in the region.” It said that the company has been ready to observe strictly all of its obligations as a foreign investor in Africa.
In August 2015, Lukoil pulled out of the oil and gas exploration and drilling project that it began in Sierra Leone. According to Interfax, a local Russian news agency, the company did not currently have any projects and has backed away due to poor exploration results in Sierra Leone.
Earlier in 2014, it was also reported that drilling in West Africa, including in Ghana, Côte d’Ivoire and Sierra Leone, did not bring LUKOIL the expected results, as preliminary technical results did not demonstrated commercial hydrocarbon reserves. According to official reports, Vice-President Leonid Fedun did not rule out that LUKOIL could withdraw from almost all of the projects in West Africa.
Another senior official told me in an emailed interview discussion that Lukoil has focused on upstream exploration projects in the waters of other West African states. Lukoil’s senior management has emphasized on more than one occasion that, if the quantity of the reserves to be evaluated on the blocks proves to be sufficient for their industrial development and exports, intensifying and broadening of the regional program would become likely for consideration.
The company’s report said that Lukoil has been active in a number of countries with a high level of political and economic risks that could significantly complicate the work of the company in a particular region, and even lead to its termination. There has been information about Lukoil possibly terminating operations in Iraq, Venezuela, Cote d’Ivoire, Egypt, Ghana and Ukraine.
Given that it has been on the landscape for nearly two decades, Lukoil is yet to be seen making significant concrete foothold in Africa, both foreign and Russian experts said in separate interviews.
Lukoil’s main activities are exploration and production of oil and gas, production of petroleum products and petrochemicals, and marketing of these outputs. It is the second largest private oil company worldwide by proven hydrocarbon reserves. Most of the company’s exploration and production activity is located in Russia, and its main resource base is in Western Siberia.