x Abu Dhabi, UAEMonday 24 July 2017

Russia's Lukoil chooses Dubai for its overseas unit headquarters move

Lukoil, the Russian energy producer, is to move the headquarters of its overseas division from Moscow to Dubai, The National can reveal.

Lukoil already has offices in two of the Dubai's free zones. Oleg Popov / Reuters
Lukoil already has offices in two of the Dubai's free zones. Oleg Popov / Reuters

Lukoil, the Russian energy producer, is to move the headquarters of its overseas division from Moscow to Dubai, The National can reveal.

The relocation, which will involve about 400 employees moving to the UAE, is intended to put executives and operational staff closer to Lukoil's major assets in Iraq's West Qurna 2, one of the biggest undeveloped oilfields in the region.

A spokesman for Lukoil in Moscow said: "We will establish the headquarters of Lukoil Overseas in Dubai in order to be closer geographically to our main projects. We already have between 600 and 700 employees in Dubai, many of whom are working on the Iraq project."

He said the move would begin in the next few weeks and would be complete before the end of the year. Andrey Kuzyaev, the billionaire businessman who is president of the overseas division, will be in Dubai this autumn to oversee the relocation.

Lukoil already has offices in two of the emirate's free zones.

Regional lawyers who have been involved in the preparation for the move suggested there had recently been tension between the senior management of the overseas division and the main group, but the spokesman said the Dubai move had been made with the full blessing of the group.

"Iraq is such a big opportunity for us, it is a strategic move," he said. Lukoil is the second-biggest oil company in Russia, after the government-owned Rosneft.

Founded in 1991 through the merger of three smaller oil producers, Lukoil's overseas expansion began in 1994, when it acquired a stake in the Azerbaijan energy industry, followed by involvement in oil and gas projects in Kazakhstan, Uzbekistan, Egypt and West Africa.

Lukoil Overseas is responsible for all the company's non-Russian activities in exploration and production. It is believed to account for about 13 per cent of Lukoil group revenues.

Lukoil's shares are quoted on the Moscow and London stock exchanges.

In 2009 a consortium of Lukoil and Norway's Statoil won a tender for the development of the West Qurna 2 field, which lies to the north-west of Basra in the south of Iraq and has recoverable reserves of about 13 billion barrels.

The area had to be de-mined before work could begin on the site, and the first oil is scheduled to be produced by early next year. Some 400,000 barrels of oil per day is expected by the end of next year.

Lukoil's investment in the project will amount to US$3.7 billion by next year, the company said, and there would ultimately be 7,500 Lukoil employees working on the Iraq project.

Lukoil also has an interest in Block 10, another undeveloped field close to Basra.

The move by Lukoil illustrates the continuing attraction of Dubai as a regional business hub, especially for energy-related companies.

In 2007, the American oil services group Halliburton moved its global headquarters to Dubai, and several other international energy companies have regional offices in the emirate.

Lukoil has interests in Saudi Arabian oilfields, but is not among the group of international oil giants bidding to win part of the Abu Dhabi onshore oil concession, currently under renegotiation.

Lukoil is crucial to Russia's economic development. Revenue from the export of oil and gas forms the country's biggest income stream.

 

fkane@thenational.ae