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Colombia: Lukoil strikes oil

LUKOIL Overseas has become the first Russian company to find oil in the Western hemisphere, with a promising discovery on the country's Condor block. Upstream success in Latin America will intensify the determination of the Russian oil major's international division to advance into North America, the world's biggest oil market.

Condor-1 was spudded in summer 2005 and reached a depth of 4,500 metres late last year. Lukoil Overseas contracted Nabors International to drill the hole. A number of other oilfield services companies, including Halliburton, Swaco, Schlumberger and Baker Hughes, also worked on the project. Lukoil Overseas says the discovery underpins earlier estimates that Condor could hold as much as 100m barrels of oil reserves. The Russian company is the block's operator (70%) in a partnership with Ecopetrol (30%), the state-owned oil company. Condor covers an area of 3,089 square km in the western part of the Llanos basin.

Terms of a contract signed in 2002 commit Lukoil Overseas to a six-year exploration term in the area, with an option to extend this to 20 years in the event of a commercial discovery. Since the Condor-1 discovery, negotiations have opened with Ecopetrol for a long-term development deal.

Lukoil Overseas has already sold 4,000 barrels of crude from the test well at Condor to a US buyer. The company says the Vasconia blend oil was of particularly high quality.

North American markets are likely to be the destination for output from the Colombian fields and from Venezuela, where Lukoil is negotiating an upstream contact. The Russians are interested in acquiring refining capacity in North America, Latin America or the Caribbean. Gennady Krasovsky, head of investor relations at Lukoil, says: "We are looking for a refinery within reach of the US products market."

Lukoil became the first Russian oil company to establish a footprint in the US when it bought a chain of over 2,000 retail service stations on the east coast from Getty Petroleum in 2001. At the time, Western analysts questioned the wisdom of the $53m investment. But, five years later, it is clear Lukoil's strategy fitted neatly with Russia's then only nascent policy: to reassert itself as an international energy super power with assets in every corner of the globe. Condor-1 is another step in the globalisation of the Russian oil business. n

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