The Russian Company LUKOIL has been affected by the Covid-19 Pandemic on different levels including crude oil production cut at the Company's fields in Russia and certain international projects due to the new OPEC+ agreement; gas production cut in Uzbekistan due to temporarily lower demand for Uzbek gas from China; reduction of refinery throughput volumes due to lower refining margins owing to lower demand for refined products; and lower sales volumes of motor fuels through filling stations because of lower demand.
The main impact of the pandemic on the Company's financial performance in 2020 is attributed to decline in prices for oil and refined products as well as lower production volumes.
According to the 2020 report, due to OPEC members and Russia’s agreement that aims to reduce the collective crude oil output by 9.7 million barrels per day starting from May 1, 2020 with subsequent gradual increase, the Company cut its crude oil production in Russia by approximately 310 thousand barrels per day as compared to the average daily production in the first quarter of 2020. By the end of 2020, the Company has gradually increased crude oil production in Russia by approximately 100 thousand barrels per day as compared to the level of May, 2020.
Crude oil production was also reduced at certain international projects. In particular, production at the West Qurna-2 project in Iraq as at the end of 2020 was 90 thousand barrels per day lower than the project capacity.
“In the fourth quarter of 2020, profit attributable to shareholders amounted to RUB 29.4 bln, which is 41.6% lower quarter-on-quarter.
As a result, in 2020, the Company booked a profit in “the amount of RUB 15.2 bln compared to RUB 640.2 bln profit in 2019. Besides lower EBITDA, the profit was negatively influenced by non-cash assets impairment and foreign exchange losses.” The report said.
“Liquid hydrocarbons production excluding the West Qurna-2 project was 1,539 thousand barrels per day in the fourth quarter of 2020, which is 2.3% higher quarter-on-quarter.”
“As a result, in 2020 liquid hydrocarbons production totaled 1,598 thousand barrels per day, which is 10.5% lower year-on-year.”
According to the report, in 2020 gas production was 29.0 billion cubic meters, which is 17.2% lower year-on-year. Production decline was due to temporary decline in demand from China for gas produced in Uzbekistan amid the COVID-19 pandemic.
On refined products, in 2020 production of refined products in Russia was 38.1 million tonnes, which is 8.9% lower year-on-year due to scheduled maintenance works and throughput optimization at refineries.
The company concluded in its financial report for 2020 that it aims to increase its oil and gas production by 2% in 2021 excepted in the West Qurna 2 project, taking into account the restrictions imposed on crude oil as part of Russia's agreement with OPEC.
It’s noteworthy that West Qurna-2 field is located in the southern part of Iraq, 65 kilometers north-west of Basra, a major seaport city, and is one of the world's largest fields. The field's initial recoverable reserves come to around 14 billion barrels. More than 90% of the reserves are concentrated in Mishrif and Yamama accumulations.