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From John Helmer, Moscow

LUKoil, the second largest of Russia’s oil producers and exporters, may spend $900 million over the next two years drilling up to 11 offshore probes for oil in the west Atlantic off Ghana and Ivory Coast, a LUKoil source told Business Day yesterday. The number of wells has diminished since LUKoil officials announced their West Africa targets in September, but the proposed investment looks larger.

“The oil wells will be drilled by several different contractors on different terms,” the LUKoil source said, “and the drilling conditions will be different as well. It is not a secret, for example, that when the first well in Ivory Coast was being drilled, we had problems with the contractor there. Seismic works are also included in the total sum.” Three wells have already been drilled by LUKoil in its large Gulf of Guinea prospecting area; one of them showing positive results; and the company has spent almost $100 million in west Africa as a whole.

Last month, LUKoil chief executive Vagit Alekperov said he is considering adding the offshore waters of Gabon to the Russian company’s African exploration campaign. A LUKoil source claims the strategy for Gabon will be to buy into an existing operating company, rather than to bid in tenders and auctions for new exploration concessions. The source suggested that as Royal Dutch Shell withdraws from many of its African concessions, LUKoil may offer to buy part of the Shell stake in Shell Gabon, the second largest oil operator in Gabon after Total. Established in 1960, Shell Gabon is divided between 75% Shell, 25% the Gabonese government. The company has been producing 50,000 barrels per day.

LUKoil produces almost 2 million barrels of oil per day, but faces a declining level of output from its Russian oilfields. For this reason it has been more active than other Russian oil producers in pursuing oil prospects outside Russia — in Iraq, Saudi Arabia, Egypt, and west Africa. The Gulf of Guinea. In the mid-Atlantic, is as rich in potential oil reserves as the Gulf of Mexico, the Russian oil company says — but with a significantly looser regulatory supervision and lower drilling and environmental safety costs.

State-owned oil company Zarubezhneft (the company calls itself Nestro in English) has also been given Russian government approval to pursue offshore prospecting rights north of LUKoil’s area in seabed blocs awarded by the Government of Guinea (Conakry). Zarubezhneft had been awarded offshore prospecting territory by the Nigerian government in 2005, but after the down payment was made, the Russian company did little. There was speculation at the time that the transaction was intended to pay the ransom demanded by Nigerian officials for the release of the Russian crew of an oil tanker, the African Pride, who were taken hostage and imprisoned in Lagos for almost two years.

An announced oil search joint venture for Zarubezhneft in Angola has also come to nothing. Asked about the company’s plans for west Africa, a Zarubezhneft spokesman said currently Zarubezhneft does not develop any projects in Angola or Nigeria. She said she can’t say why because “this is a serious topic”, and will require permission of the chief executive, Nikolai Brunich, to say more. The company has been producing oil in a joint venture with Vietnam for many years, and has announced plans to prospect for oil off Cuba. The company website notes that it is studying “possible forms and directions of joint work with the companies of Equatorial Guinea, Libya, Ecuador, Angola.”

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