ANNUAL REPORT 2005 - Lukoil

ANNUAL REPORT, 2005
increased by 1.5% compared with 2004, mainly due to acquisition of production assets. The share of
idle wells in total operating wellstock declined from 17.9% to 16.8% thanks to Company efforts to
improve production efficiency.
The Company increased drilling of sidetracks at oil wells in 2005. A total of 102 sidetracks were commissioned,
giving 25 tonnes average daily production increase per well and 427,000 tonnes additional
oil production. That compares with 63 new sidetracks in 2004, which gave average daily increase of
22 tonnes per well and total additional production of 181,000 tonnes.
Functioning of the Company's mechanized wellstock was optimized via 2,677 operations in 2005, 110
wells were transferred to mechanized production, and there were 5,052 operations to raise oil recovery.
Overall efficiency gains from the operations equalled 30 million tonnes of oil.
In 2005 the Group withdrew 425 marginal wells and wells with high water cut (average water cut
equal to 98.7%) as part of the complex program for optimization of development and production of oil
by LUKOIL in the period 2003–2005. This action, together with application of modern technologies for
increasing oil recovery and drilling of horizontal wells and sidetracks, led to 3.5% average increase of
daily flow from oil wells, to 11.1 tonnes, and prevented growth of the water-cut level in production.
The action also saved extraction of 2.9 million tonnes of associated water, reducing energy costs. It is
important to note that average daily flow rate from Company wells has been steadily increasing over
recent years (from 8.6 tonnes in 2001 to 11.1 tonnes in 2005).
The new complex program for optimization of development and production of oil by LUKOIL in the
period 2006–2008 was approved in 2005 and aims to further increase field development efficiency and
to reduce operating expenses.
Energetic development of new oil production regions and application of modern technologies enabled
increase of average daily flow rate per new well to 41.9 tonnes. Average daily flow rate per horizontal
well increased by 22.5% from 102 tonnes in 2004 to 125 tonnes in 2005.
Despite real appreciation of the rouble (supported by relatively high inflation in the Russian economy)
the Company was able to rein growth of oil production costs, which were only 6.6% higher than
Producing Oil Wellstock,
thousand wells
Drilling of Horizontal Wells,
wells
Drilling of Sidetracks,
sidetracks
22.8
22.6
22.8
50
40
41
120
100
102
22.4
22.2
22.2
22.1
30
20
29
80
60
40
51
63
22.0
10
9
20
21.8
2003
2004
2005
0
2003
2004
2005
0
2003
2004
2005
32