News | May 20, 1999

Lukoil Launches Jackup Astra to Begin Northern Caspian Development

Lukoil, Russia's foremost independent oil company, has launched the upgraded Astra (formerly Marava) jackup oil rig at Astrakhan, Russia. It is designated for development activities in the Northern Caspian offshore area. The unit has three supports 66 meters high and can be used for drilling in sea depths up to 45 meters and well depths up to 5,000 meters.

This jackup was acquired by Lukoil-Reserve-Invest in accordance with the terms of the investment tender held in June 1997 to sell 5% of Lukoil shares pledged as collateral. After being upgraded at the Krasnye Barrikady plant in Astrakhan, it is to start drilling the first exploratory well at the Khvalynskoye Field, which is part of the Severny license area.

Lukoil won a tender and acquired the right to develop an 8,000 km2 area with estimated reserves of 300 million tons of hydrocarbons in December 1997. The company estimates the total return for Russia from the development of the field will be US$25 billion.

Lukoil conducted a large-scale geological and environmental survey at the Severny license area and spent $70 million. The company signed contracts worth of $120 million with subcontractors who will also participate in the project.

Four prospecting holes are expected to be drilled at the Severny block. Development wells will be drilled during the fourth year of the project implementation, production will be started during the fifth year. It is expected that the maximum level of the annual production of 15-million tons will be achieved during the eighth year of the project. Some 200 development wells are planned to be drilled at the license area.

While developing the Severny block, ice-resistant stationary platforms will be used. Oil transportation even at early stages of the project will be conducted by Lukoil's own fleet, including the river-sea class tankers. At later stages, the transportation of oil can be implemented via the Caspian Pipeline system.

Given the fact that this area of the Caspian sea is considered a unique environmental habitat, Lukoil is especially sensitive to environmental protection issues. State-of-the-art reliable techniques with the so-called zero disposal and special watercraft for operating in shallow waters will be used. Oil gathering equipment was installed for emergency situations. The company committed to finance expenditures for commercial species breeding. Lukoil is one of the founders of the Regional Caspian Environmental Center, which has a mandate to preserve the ecological balance in the region.

Lukoil President Vagit Alekperov said at the launching of the Astra that this is Russia's first serious step toward developing significant reserves in the Northern Caspian. The company has spent four years evaluating the region's hydrocarbon potential and has concluded that there are about 2 billion tons of extractable hydrocarbons in this sector of the Sea, 75% of which is oil. At present, Lukoil is the only large oil operator extracting minerals from the Russian sector of the shelf. Gazprom and Yukos are, however, also showing an interest in this area.