Lukoil Spends Billions to Invest in Oil Firm Samara

Lukoil, the second largest oil company in Russia, recently bought Samara-Nafta in its entirety. Samara-Nafta is owned by the Hess Corporation, a U.S. energy firm which has been auctioning off some of its oil assets.

The Russian oil major is awaiting the country’s anti-monopoly regulators to give their go signal, allowing it to finalize oil investment in Hess’ energy firm.

Hess auctioned off Samara-Nafta November 2012 and received offers from around 30 energy firms. Oil majors who took interest in the oil firm included government-owned Gazprom, Neft and Rosneft. Hess closed the bidding process in the first quarter of this year.

Samara gets more than 2 million tons of oil annually from oil fields located in two of Russia’s cities, Samara and Ulyanovsk. Aside from holding more than 80 million tons of oil reserves, it is also licensed to drill and develop about 60 oil fields scattered in various regions.

Vagit Alekperov, current head of Lukoil, said that it bought Samara because of the quality of its assets.  He added that these are strategically located in a region that houses modern oil and gas plants – one of the best in the country. Major markets for petroleum-based commodities are also in close proximity.

In general, investing in oil firm Samara matches Lukoil’s long term plans of ensuring growth of oil outputs and of ensuring a steady supply of the commodity in Russia.

Meanwhile, Lukoil’s VP, Leonid Fedun, expressed his reluctance to consider oil investments in the Arctic shelf.  He feels that the region poses too much of a hazard and that the returns won’t be enough to offset such risks.

Fedun, also a key stakeholder in Lukoil, told a leading news team that he wouldn’t bother dropping a single dime in a project that involves investing in oil exploration in the treacherous region.

He went on to mention Royal Dutch Shell’s troubled drilling efforts in the Alaskan region. While it had invested some $5 billion to develop oil fields in the area, there hasn’t been any significant discovery so far that would’ve encouraged stepping up oil exploration. Fedun believes there are other worthwhile oil investments that can do away with laying out pipelines, establishing power sources, and locating dwelling units for employees and laborers.

Fedun’s statements, however, may not reflect exactly what Alekperov had in mind early last year. At around that time, he asked former President Vladimir Putin for permission to operate in Russia’s Arctic region. He was also contemplating on forming a joint venture with another oil major to develop the region, but it seems that no conclusive plans have been drawn to date.