ANNUAL REPORT 2005 - Lukoil

ANNUAL REPORT, 2005
LUKOIL is realizing oil & gas E&P projects in 10 countries worldwide. Most activity is concentrated
in four federal districts of the Russian Federation: North West (Nenets Autonomous District, the
Republic of Komi and Kaliningrad Region); Volga (Perm and Saratov Regions, and the Republic of
Tatarstan); Urals (Yamal-Nenets and Khanty-Mansiysk Autonomous Districts); and South
(Vologograd and Astrakhan Regions, and the Republic of Kalmykia). Outside Russia LUKOIL is taking
part in 21 projects in 9 countries: Kazakhstan, Azerbaijan, Uzbekistan, Egypt, Iran, Iraq,
Columbia, Venezuela, and Saudi Arabia.
The Company achieved impressive results in 2005 in the Exploration & Production segment, due to the
favourable price environment and continuation of the restructuring process for improvement of production
efficiency. The average Urals oil price was 46.9% higher in 2005 than in 2004. Average daily hydrocarbon
production grew by 5.4% to 1.94 million boe (oil by 4.7% to 1.82 million barrels and gas by 17.3%
to 122,000 boe). Despite real strengthening of the rouble (on a background of fairly high inflation in the
Russian economy), the Company managed to restrain growth of oil production costs, which were only
6.6% higher than in 2004 at $2.75 per barrel of oil produced. As a result net income in the Exploration &
Production segment was $3,362 million. These results testify to the Company's continued successful
development in accordance with its strategic and tactical goals.
The main achievement in 2005 was substantial expansion of the resource base of LUKOIL Group both
through successful geological exploration work and through acquisition and consolidation of other
companies. Major growth of resource potential enabled LUKOIL to increase forecast production
growth rates. In 2005 LUKOIL made the largest discovery of the last 10 years in the Northern Caspian,
changing the economics of resource development in the region. The Company was also involved in
discovery of a large oil field in Iran (the Anaran project). LUKOIL took a 66% interest in Geoilbent,
which develops fields in Western Siberia. The Company also acquired the remaining 50% of
SeverTEK, which develops four fields in Timan-Pechora, from Neste Oil. LUKOIL consolidated Tursunt,
which is developing three fields in Western Siberia, and acquired Primorieneftegaz, which has a
license for geological study of the Poimenny territory, where the major Tsentralno-Astrakhanskoye gas
condensate field was discovered in 2004.
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