Upstream

G4-6, G4-9,
GRI G4 OG1, G4-13

The Company performs oil and gas upstream activities in 12 countries Hereafter in this section, information about the Company is given as of December 31, 2016, unless otherwise specified. across the globe. The principal area of operation is Russia, while the largest projects abroad are implemented in Central Asia and the Middle East. G4-6

A total of 88 percent of all proved reserves of the Company and 86 percent of its commercial oil and gas production is based in Russia. West Siberia is the principal region by resource base size and oil production volumes. The resource base is of high quality. The bulk of reserves are conventional, which means upstream costs are among the lowest in the industry. The basis of gas production in Russia is the reserves in The Bolshekhetskaya Depression (Yamalo-Nenets Autonomous Area). The Nakhodkinskoye field is the main gas field, accounting for over half of all commercial gas produced by the Company in Russia.

The main events of the 2016 reporting period in Russia were the launch of the Filanovsky field, which is the largest oil field discovered in the Russian region of the Caspian Sea, and the startup of oil production at the Pyakyakhinskoye oil and gas condensate field in the northern region of West Siberia, which is of special importance since considerable volumes of natural gas will be produced here in addition to oil.

In 2015–2016, in addition to the V. Filanovsky and the Pyakyakhinskoye fields, eleven new fields, predominantly in the Timan-Pechora and the Volga River Region, were brought into operation in Russia. To boost operational efficiency, exploratory drilling is being stepped up in West Siberia, along with production of high-viscosity oil in the Timan-Pechora province.

In 2015, the LUKOIL Group entered a new promising market: The Company was awarded a contract for the Eastern Taimyr block in Western Siberia (the Krasnoyarsk Territory).

In 2016, a decision was made to step up exploratory drilling in Western Siberia, which should increase future production.

In order to use natural resources efficiently and ensure full extraction, including hard-to-recover reserves, LUKOIL uses cutting-edge production methods including those designed by the Company’s R&D department.

In other countries, The main changes that occurred in the reporting period are as follows: a deal to sell a 50 percent stake in Caspian Investment Resources Ltd. owned by a LUKOIL Group entity was finalized in 2015. G4-13 major upstream activities are performed in Romania, Nigeria, Norway, Uzbekistan and Iraq. A wildcat well in Romania’s Black Sea shelf area was completed in 2015, with a new deposit discovered.

Oil production, thousand tons
G4-9, GRI G4 OG1, G4-13

Note. The negative impact on production figures is mainly due to reduction in the amounts of compensation oil received under the West Qurna 2 Project in Iraq, as a substantial part of the historical costs was already recovered in 2015. Reduced production in Western Siberia is due to the natural depletion of mature fields. Production was boosted, however, by the launch of two large fields (Filanovsky and Pyakyakhinskoye), increased exploratory drilling in West Siberia, and increased production in Timan-Pechora and the Pre-Ural regions, mainly achieved through modern mining methods.

Commercial gas production (with share in production of affiliated entities), million cubic meters

The main international gas production projects are in Kazakhstan and Uzbekistan , with the latter accounting for over half of the natural gas produced by the Company abroad. Production under the Kandym’s Early Gas project began at the Kuvachi-Alat field in Uzbekistan in 2015, while construction of the Kandym Gas Processing Complex was initiated in 2016. Natural gas production remained stable throughout the reporting period.

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