Russian private-sector oil producer Lukoil's co-owner and vice president Leonid Fedun doubts the country will be able to restore its crude production to pre-pandemic levels in April.
Speaking after the presentation of Lukoil's Global Energy Perspectives to 2050 report today, Fedun said Lukoil has some idle capacity to deliver a slight production increase at the beginning of next year, but a further increase is in doubt.
Russian deputy prime minister Alexander Novak has said the Opec+ agreement, under which Russia is able to raise output by 100,000 b/d each month, would return the country's production to pre-Covid levels by May. But recent slowdowns in production growth have cast doubt on the ability of Russian producers to deliver the agreed monthly increase. Russian liquids growth slowed to just 0.4pc in November, and to less than 0.3pc in the first half of this month. Last month all three of Russia's top crude producers, including Lukoil, said they had exhausted or almost exhausted their spare production capacity.
"There are geological reserves in place but for their development tax instruments and financial investments are needed," Fedun said. Lukoil as of this year lost tax concessions for costly high-viscosity crude production, which drove the firm's output in recent years.
Fedun said Russia's crude output is likely to decline because of insufficient upstream investments.
"At first crude production will stagnate and will then start declining naturally," he said, adding the world needs up to $1 trillion/year of upstream investments "but nobody is investing such funds."
He said global crude demand will rise at least until between 2030-35, but demand for hydrocarbons will inevitably dry out in Europe around that time. Like state-controlled Gazpromneft, Lukoil expects it will then export more to Asia-Pacific and Africa.
Diesel's future in Europe is "sad" but the demand outlook in other parts of the world remains "bright," Fedun said.
"The market is the same and whether you take it [diesel] to Rotterdam, Johannesburg, or Singapore, does not make a big difference," he said.
Lukoil will strive to become carbon neutral by 2050, Fedun said, but has not figured out how given the absence of technologies to make this happen. The firm's revised long-term strategy, approved by the board this week, envisages investments of $15bn in renewables until 2031. Lukoil targets a reduction of controlled emissions by 20pc to 2030 and hopes to bring the share of gas production in its overall output to 30pc by 2031.
Like other refiners, Lukoil faces declining efficiency of its European plants, but it has no plans to sell having considered this several years ago.
"Everybody is aware of the problem: a ton of emissions costs €84 therefore there is just one thing, to increase efficiency and find niches that will allow these refineries to to keep operating with a profit," he said. Lukoil is looking into prospects of plastic recycling, second generation biofuel and methanol production at its refineries.
In Europe Lukoil owns the 320,000 b/d Isab refinery on Sicily, the 50,000 b/d Petrotel refinery in Romania and Bulgaria's 140,000 b/d Burgas refinery. It has a 45pc stake in the Netherlands' 150,000 b/d Flushing refinery.
