ANNUAL REPORT 2005 - Lukoil

ANNUAL REPORT, 2005
Creation of the joint venture between LUKOIL and ConocoPhillips based on assets of Naryanmarneftegaz
was completed in 2005. The joint venture retained the name 'Naryanmarneftegaz' and is focused on
development of fields in northern Timan-Pechora. It has taken control of 16 fields with proved, probable
and possible reserves of 2.7 billion barrels. The venture produced 600,000 tonnes in 2005 at five fields:
Toboiskoye; Toraveiskoye; Varandeyskoye; Myadseyskoye; and Perevoznoye, which was brought into production
in 2005. Naryanmarneftegaz is currently preparing to start production at nine more fields.
Production at the Kravtsovskoye field in the Baltic Sea, which was commissioned in 2004, grew rapidly
in 2005. Output was 562,000 tonnes, which is 16% more than had been forecast. Growth of output
at the Kravtsovskoye field represented 13.6% of overall growth of Company oil production in
Russia in 2005.
Work continued in 2005 on preparing Caspian offshore fields for development. Russian supervisory
bodies have approved an investment plan for preparation of the Yu. Korchagin field. Technological
schemes for development of the Rakushechnoye, Sarmatskoye and 170th kilometer fields have also
been approved. Work on planning and construction of an onshore production and transport base have
been carried out in order to ensure supply of material and technical resources to the offshore fields.
LUKOIL continued to consolidate and acquire highly efficient assets in Russia in 2005. Purchases
included the remaining half of SeverTEK, whose total production in 2005 was 1.508 million tonnes, of
which the LUKOIL share was 816,000 tonnes. Tursunt, with annual production of 385,000 tonnes of
which the LUKOIL share was 280,000 tonnes, was also consolidated. LUKOIL bought a 66% interest
in Geoilbent, whose production in 2005 was 1.064 million tonnes, of which the LUKOIL share was
353,000 tonnes. The new acquisitions increase LUKOIL daily production by 37,000 boe (data are for
December 2005, not taking account of any future production increases from the relevant assets).
International Projects
The LUKOIL share of production in international projects in 2005 was 3.881 million tonnes. Average daily
production in international projects rose by 11.8% and organic growth of daily production was 1.4%.
Production drilling in the Company's international projects was 125,000 meters. Operating oil wellstock
totalled 735 wells, of which 600 were in production. 32 new production wells were commissioned
in 2005. The new wells gave 0.26 million tonnes of additional oil production.
Overall spending on oil production as part of international projects was $80 million or $5.43 per barrel,
and capital expenditure was $431 million, and investments were $1,959 million.
LUKOIL lends special importance to development of its international business. The Company's international
portfolio in 2005 consisted of seven projects for field development and production of oil and
gas condensate. Five projects actually produced oil and gas condensate in 2005: Karachaganak,
Kumkol and Tengiz (in Kazakhstan); and Meleiha and WEEM (in Egypt). Other projects were at the
stage of field preparation and pre-production work.
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