Lukoil, a minority partner in the Statoil ASA-led Anaran project, took a $63 million impairment loss in December “due to the incapability of undertaking further works because of the threat of economic sanctions of the U.S. government,” according to its 2009 financial statements published today.
The Moscow-based oil producer is vulnerable to sanctions as it owns a network of U.S. filling stations with Houston-based ConocoPhillips, which plans to sell half its 10 percent stake in Lukoil in two years.
“We aren’t saying goodbye,” Andrei Kuzyaev, head of Lukoil’s overseas arm, said today during a presentation in London. “It’s just the principal position of our auditors and doesn’t mean that we lose the rights to that project.”
If political and economic conditions are favorable, Lukoil is ready to return to the project, Kuzyaev said.
The Iran Sanctions Act, intended to deny the oil-rich Persian nation resources to further its nuclear program or support U.S. identified terrorist organizations, forces companies to choose between the U.S. and Iran. Companies investing over $20 million a year in Iran’s energy sector are subject to U.S. restrictions.
Foothold in Iran
Lukoil, Russia’s largest non-state oil company, has looked to projects outside Russia for profit and expansion because of Russia’s tax burden and the preference given to state companies on new projects.
“Gazprom Neft is a safer option to maintain Russia’s existing link with Iran than the more commercially exposed Lukoil,” Chris Weafer, chief strategist at UralSib Financial Corp., said today. “Russia does not want to give up on its foothold in one of the top OPEC countries by reserve base nor to be seen as complying with U.S. pressure.”
Gazprom Neft, the oil arm of Russia’s largest company OAO Gazprom, aims to develop Iran’s Azar and Changuleh deposits. U.S. sanctions do not interfere with the company’s plans, Gazprom Neft CEO Alexander Dyukov said in December.
Net income from projects outside Russia may reach $1.5 billion in 2015 from $612 million last year, Kuzyaev said. Lukoil plans to doubled foreign output to 162.9 million barrels in that time, he said.
Net profit slid 23 percent to $7.01 billion last year as the crisis damped prices and demand at the beginning of the year, the company said today. Lukoil had net income of $1.73 billion in the fourth quarter from a loss of $1.62 billion a year earlier, according to Bloomberg calculations. That missed the median estimate of $2.1 billion in a Bloomberg survey of analysts. Sales climbed 32 percent to $24.3 billion.
With Statoil, Lukoil signed a deal in January to develop the West Qurna-2 field in neighboring Iraq, for which the Russian company had received a contract under former dictator Saddam Hussein’s regime. Lukoil plans to spend $3.7 billion on the project, Kuzyaev said today.
–Editors: Torrey Clark, Stephen Cunningham
