LUKoil Plans to Become Second-largest Gas Producer in Russia

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Russia's largest crude producer LUKoil plans to become the country's second-largest gas producer, the company vice president said at a 2006 company reporting presentation Tuesday,cited by RIA Novosti.

„We hope to become producer number two after Gazprom,” Leonid Fedun said. LUKoil commercial gas production in 2006 was 13.6 billion cubic meters. The share of gas in the aggregate hydrocarbon production volume grew from 5% to 10% in the period, and will in the future be brought to 33%, in line with strategic plans. By 2016, LUKoil plans to increase gas production five-fold - to 70 billion cubic meters. LUKoil said earlier Tuesday its net income increased 16.2%, year-on-year, in 2006 to $7.48 billion, whereas earnings before interest, taxes, depreciation and amortization (EBITDA) increased 18.2% to $12.3 billion and sales grew 21.4% to $67.7 billion.

LUKoil CEO Vagit Alekperov said at a presentation in London that his company plans to start industrial production of gas at its projects, whose maximum production level is assessed at 10 billion cubic meters annually, in Uzbekistan in late 2007. He said a level of 3 billion cubic meters could be reached in 2008. Alekperov said the gas would be sold at a price negotiated between Gazprom and Uzbekistan, $100 per 1,000 cubic meters. A consortium of investors said in August 2006 that they signed a production-sharing agreement to prospect and develop oil and natural gas fields in Uzbekistan.

Exploration conducted by Uzbekneftegaz, the Central Asian state's national petroleum corporation, proved the Aral Sea holds vast hydrocarbon reserves, and work has started on two of the eight gas condensate fields discovered there in the last few years. The consortium, made up of Uzbekneftegaz, Malaysia's Petronas, Russia's LUKoil Overseas Holding Ltd., South Korea's KNOC and China National Petroleum Corporation, was established in September 2005. Uzbekistan is the former Soviet Union's second natural gas producer, behind Russia, with an annual gas output of 55 billion cubic meters.

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