Lukoil, ConocoPhillips’ Yuzhno Khylchuyu (YK) Field Production Begins

HOUSTON, TX and MOSCOW, RUSSIA.--OAO LUKOIL President Vagit Alekperov and ConocoPhillips Chairman and CEO Jim Mulva today participated in a special ceremony on the occasion of the startup of the Yuzhno Khylchuyu (YK) field located in the Nenets Autonomous District.

One of the biggest fields in the north of the Timan Pechora oil and gas province, this field is developed by OOO Naryanmarneftegaz, a LUKOIL and ConocoPhillips joint venture (70% and 30%, respectively).

The field was discovered in 1981. Oil quality there surpasses the Russian Urals export blend quality: its density is 35.5 API (Urals, 32.0 API), and sulfur content is 0.71% (Urals, 1.3%).

The first stage comprises 32 development wells, an oil treatment unit, an oil desulfurization unit, a tank farm with the total volume of 40,000 m3, a power supply complex with the rated capacity of 125 MW, and other units.

Startup of the second stage of the YK field is scheduled for December 2008, at which time an additional 32 wells will be put into operation and a high-pressure compressor station and sulfur disposal and storage facilities will be completed.

The design oil production level in the field is expected to reach 7.5 million tons a year (more than 150,000 barrels per day) in 2009.

Oil produced at the field is transported by a 158-kilometer-long oil pipeline (530 mm in diameter) to the Varandey Oil Export Terminal located on the Barents Sea coast, with the capacity of 12 million tons per year, from where it is delivered, also through a floating storage facility in Kola Bay, by 70,000 ton deadweight tankers, for eventual sale to European and North American markets.

“Commercial production at YK and the link to the new Varandey transportation corridor will intensify the development of resources in the Timan-Pechora Oil and Gas Bearing Province, which will certainly contribute to increased oil production in Russia. The development of the YK field is a graphic example of the mutually rewarding cooperation between LUKOIL and its strategic partner, ConocoPhillips,” said Alekperov.

“The launching of the YK field is a major accomplishment. In less than three years since forming Naryanmarneftegaz with LUKOIL, we have built both producing facilities and a transportation infrastructure. We appreciate our good relationship with LUKOIL and are proud that we work together so well,” said Mulva.