Lukoil Delays Joining Total-Led Kharyaga Project Due to Disagreements on Economics

Strategic Insights -

Lukoil, a major Russian oil company, has hit significant delays in joining the Total-led Kharyaga project in the northern Timan-Pechora oil province due to disagreements between Total and the Russian government over project costs. Lukoil president Vagit Alekperov stated that the company is dissatisfied with the "economics of the project being offered by the operator." Alekperov also mentioned that litigation between Total and the Russian government must be settled before Lukoil can participate in the project. Total had filed a lawsuit against the Russian government over the project's costs, which led to the Russian authorities refusing to include the project's expenses in the cost recovery category and slapping a tax bill of tens of millions of dollars on Total.

Key Takeaways:

  • Lukoil has hit delays in joining the Total-led Kharyaga project due to dissatisfaction with the project's economics.
  • Total filed a lawsuit against the Russian government over the project's costs, which led to the Russian authorities refusing to include the project's expenses in the cost recovery category.
  • The dispute has resulted in a tax bill of tens of millions of dollars being slapped on Total.
  • Lukoil president Vagit Alekperov stated that litigation between Total and the Russian government must be settled before Lukoil can participate in the project.
  • Lukoil had made an advance payment of $4 million for its stake in the project.
  • The outstanding 10% in the Kharyaga PSA is held by the Nenets Oil Co. (NOC), which is under bankruptcy proceedings.
  • Rosneft refused to buy NOC's stake in the project due to unattractive economics.

Statistics:

  • $4 million: advance payment made by Lukoil for its stake in the project.
  • 10%: stake held by the Russian company in the Kharyaga project.
  • $10s of million: tax bill slapped on Total by the Russian authorities.

Sources:

  • NC (Sep. 25, p1)