MOSCOW, January 22 (RIA Novosti) – Russian oil company LUKoil is set to renew a deal for state energy giant Gazprom to buy the natural gas that it draws at its oil fields, business daily Vedomosti reported Wednesday.
LUKoil is expected to boost gas production as new fields come online, but will continue to sell the fuel to Gazprom under a deal likely to be signed at the end of March, Vedomosti said citing representatives of both companies.
Large quantities of natural gas are produced in the process of extracting oil, and most major oil companies also run natural gas operations.
The move reported by Vedomosti signals LUKoil's unwillingness to compete directly with Gazprom despite the gas giant's declining share of the domestic market caused by the increasing assertiveness of independent gas producer Novatek and oil giant Rosneft.
Analysts expect Gazprom's share of gas sales inside Russia to fall sharply in coming years.
LUKoil President Vagit Alekperov and Gazprom Chairman Alexei Miller discussed cooperation over natural gas during a meeting on January 16, according to a Gazprom statement.
The gas to be sold to Gazprom will come from LUKoil fields in northern Russia’s Yamal Nenets Autonomous Region, as well as in the Caspian Sea and Uzbekistan, Vedomosti said.
LUKoil is unwilling to attempt to trade the gas itself because of difficulties getting access to the country’s gas pipeline network, which is controlled by Gazprom, the newspaper cited a LUKoil representative as saying.
LUKoil will triple its gas production to about 23 billion cubic meters in 2020 making it the fourth-largest producer in Russia, according to Vedomosti.
