ANNUAL REPORT 2005 - Lukoil

ANNUAL REPORT, 2005
The company's resource base has high levels of productivity, as confirmed by rapid production growth
rates in recent years. According to forecasts, daily oil production by Nelson Resources will increase to
75,000 barrels by 2009.
Acquisition of Nelson Resources for $1,951 million (the company also had net debt of $60 million at
the time of the acquisition) was the biggest deal in LUKOIL's history and enabled the Company to rise
from 9th to 4th place among the biggest hydrocarbon producers in Kazakhstan.
TRANSPORT PROJECTS IN THE CASPIAN REGION
Company management is aware that LUKOIL's strategically important position in the Caspian region
depends on development of transport infrastructure. LUKOIL is therefore taking an active part in transport
projects, particularly that being implemented by the Caspian Pipeline Consortium (CPC).
The CPC is 1,510-kilometer oil pipeline linking the Tengiz field with South Ozereyevka sea terminal
near Novorossiysk. The first framework agreement on construction of the CPC was signed in mid-
1992 between Kazakhstan, Oman and Russia. The first phase of the pipeline with annual throughput
capacity of 28.2 million tonnes was launched at the end of 2001. In October 2004 it was decided
to increase the CPC capacity to 67 million tonnes by 2008. The first oil tanker, supplied via the
CPC, was loaded with oil in October 2001.
LUKOIL's share of production at the Tengiz oil field has been transported via the CPC since its commissioning
in 2001. In October 2003 LUKOIL and Petrokazakhstan completed construction of the
Kumkol–Dzhusali pipeline, which enables deliveries of oil from the Kumkol field via the CPC (oil is transported
to Dzhusali by pipeline and from there by railway to the CPC). In May 2004 the
Karachaganak–Atyrau pipeline was completed, allowing LUKOIL's stable gas condensate from Karachaganak
to be pumped via the CPC. Finally, in November 2004 completion of a railway oil terminal adjacent
to the Kropotkinskaya Pumping Station made it possible to feed LUKOIL crude from Volga and Western
Siberian fields into the CPC (1.4 million tonnes of crude were transported by these means during 2005).
In addition to the CPC and associated pipeline projects in Kazakhstan LUKOIL has built an oil export terminal
at Ilinka in Astrakhan Region. The first phase of the terminal was commissioned in October 2003.
Transport Volumes via
the CPC, million tonnes
40
CPC Shareholder Structure (01.01.2006)
BG (2.0%)
Rosneft – Shell (7.5%)
Kazakhstan Pipeline
Ventures (1.75%)
30
20
14.78
22.51
30.50
Oryx CP (1.75%)
Mobil (7.5%)
Agip
International (2.0%)
Russia (24%)
10
LUKArco (12.5%)
Kazakhstan (19%)
0
2003
2004
2005
Chevron (15%)
Oman (7%)
98