Ukrnafta plans to double oil and gas production, triple oil refining by 2027
MOSCOW. June 8 (Interfax) - Ukrnafta's strategic goal is to double oil and natural gas production by 2027, to 3 million tonnes and 2 billion cubic meters respectively, the company's first deputy CEO, Denis Kudin, said at the recent Ukrainian-Swiss business forum in Lugano.
"Obviously, this will lead to increased refining (Ukrtatnafta, like Ukrnafta, is now under state control) which will reach 6 million tonnes and will triple compared to pre-crisis volumes. Our plan is to sell these products in Ukraine," Ukrainian media quoted Kudin as saying.
He said the five-year plan envisaged doubling wholesale in fuel to 3 million tonnes and retail at Ukrnafta filling stations four-fold to 1.5 million tonnes.
Kudin said local refineries supplied just 20% of Ukraine's fuel market, which is 10 million tonnes per year, and the other 80% was imported from the EU and some other countries, notably India and China.
"So we have the full potential to close this gap in the market and be able to produce enough fuel for our own needs," Kudin said.
The company can offer investment opportunities worth $4 billion, including six first-rate investment projects, to achieve these goals, he said.
The biggest of them is a refinery upgrade costing $2.5 billion with a production capacity of 11 million tonnes and refining depth of over 95%, complying with international standards. This project can be launched in about 2.5 years, Kudin said, but given the lengthy planning and engineering, it would be possible to start now.
The second biggest project involves investments in oil exploration and production at existing and new fields. Kudin said the company was working at 89 deposits on an area of more than 2,000 square km. Some of them are already depleted, but oil production from them can be increased with advanced recovery methods.
"According to our estimates, investments in brownfield oil production are about $805 million over five years. We have already identified the fields that we propose to consider for co-investment. Our contribution will be to develop brownfields with proven reserves, surface infrastructure and production licenses," Kudin said.
He said investors would be expected to make financial investments, as well as providing engineering know-how as to how best extract oil from these fields if it is a specialized company.
Kudin said another rare opportunity for investors was greenfield development and oil production in western Ukraine, where the company is well positioned to obtain a new license in the coming months for about 6,000 square km, which is three times the current area.
Kudin said Ukrnafta was ready to carry out this 20-year project itself, but would be happy to bring in co-investors - the project is estimated at $463 million. The project in question is the Oleskaya license in the Lvov region, which has good development potential.
Three other investment projects are related to decarbonization and modernization of obsolete energy-intensive equipment with high CO2 emissions. Ukrnafta has held talks with several American and European companies that can supply electric pumps and tubes. The project costs are $150 million and the company would welcome financing proposals to launch it as quickly as possible.
The second of this group of projects is the development of Ukrainian infrastructure for drilling rigs, Kudin said. According to the company's estimates, the market needs another six new drilling rigs and at least two seismic survey crews, and there will be enough work for them and seismic surveying for the next five years.
"Here we would willingly consider either a long-term JV contract, or other options for joint investment," Kudin said.
He said Ukrnafta had already identified specific locations for new wells and was ready to start work as soon as the equipment arrives.
"And, finally, perhaps the largest decarbonization project that we can offer is the modernization of the gas processing plant," Kudin said.
He said other Ukrainian gas and oil companies had already invested in the gas processing plant upgrade, while Ukrnafta had not yet done so. The company has seven sites where the LNG compressors need to be replaced, which will result in lower CO2 emissions, huge energy savings and a very good payback period and IRR on this investment, which is estimated at around $65 million.
Ukrnafta is Ukraine's biggest oil producer and Ukrtatnafta its biggest oil refiner. The Headquarters of the Supreme Commander-in-Chief ruled on November 5 to expropriate Ukrnafta shares, except for the stake held by Naftogaz, as military assets while martial law remains in effect. A stake of about 42% was owned by the firms belonging to Igor Kolomoisky and Gennady Bogolyubov prior to the expropriation.
Ukrnafta plans to increase oil production 5.8% to 1.45 million tonnes and gas 0.3% to 1.04 billion cubic meters in 2023.
Ukrnafta had 89 fields with 23 million tonnes of proven reserves and 1,806 active oil wells and 152 gas wells as of the end of March 2023. The company operates 537 filling stations, of which 28 have been modernized; their sale this year are expected to reach 350,000 tonnes, or about 7% of the market. Wholesale and retail in petroleum products amounted to 1.665 million tonnes in 2022.