An Oil and Gas Success Story Shines Through Turbulent Market
Oil and gas market leaders, politicians and academics gathered at the World Energy Congress in Istanbul, Turkey, in mid-October to discuss the current state and future perspectives of the global energy ecosystem.
Participants predicted global energy demand will more than double by 2050, establishing new challenges for the global market – not only in terms of meeting the needs of consumers and industries, but also in minimising any negative impacts on the environment. Undoubtedly, renewable energy can address this.
According to Congress participants, renewables will have the biggest growth potential over the next three years. In the foreseeable future, however, the fossil fuels are destined to form the basis of global energy sources providing most of the energy needs.
Leonid Fedun, the vice president of Strategic Development at LUKOIL, one of the largest vertically integrated oil and gas companies in the world, with headquarters in Russia, said: “Advanced technologies such as electric cars and renewable energy sources will grow, but will not displace the existing ones. The emergence of new energy never led to withdrawal of other energy sources from the market”.
The importance of fossil fuels, in conjunction with the instability of the hydrocarbons market and the need to meet the ever growing demand for ecological efficiency, has put the spotlight on oil and gas companies. In order to succeed in the market, the oil and gas companies need to adapt quickly to the new conditions with a diverse portfolio of projects and a competent development strategy.
Meanwhile, the low oil prices over the last two years have resulted in the reinvigoration of the industry where only strong and active players with viable projects survive. As such, the LUKOIL Group is of a particular interest. Despite the difficult economic situation and unstable socio-political conditions, the company has managed to consolidate its position as a leading global player. It is working on projects across four continents, in more than 40 countries – from Siberia to Iraq and from Norway to Mexico.
A publicly traded company with a staff of more than 100,000, it controls more than 2% of oil production and about 1% of proved hydrocarbon reserves worldwide. LUKOIL’s vertically integrated model includes all aspects of the oil and gas market, from geological research to selling finished products to consumers. Its diversified portfolio has helped LUKOIL reduce the risks posed by market volatility and socio-political changes.
At the same time, LUKOIL has demonstrated a high level of corporate social responsibility, continuously reducing the company’s impact on the environment, lowering waste volumes and keeping up to date with work safety principles.
During its history, LUKOIL has always been in the vanguard of scientific and technological progress. It has achieved prominent technological advancements making these one of the company’s key success factors. For example, during this past year alone, the company invested an estimated $800m in environmental protection programmes, employing efficient environment-friendly technologies in all its projects.
LUKOIL was one of the first companies in the market to introduce a so-called “zero discharge” principle in its offshore projects in the Baltic and Caspian seas. This principle implies that no pollutants are dumped into the water. LUKOIL’s technologies and experience in this field were recommended by HELCOM and the World Wildlife Fund as a model for environmental standards in offshore oil production with a recommendation for fixing them as legal requirements for similar projects in the future.
“The fuel and energy complex is becoming more compound and integrated system where players such as LUKOIL, are not just oil, but energy companies that develop projects in the traditional and alternative energy,” said Fedun.
The company is certain that renewable energy will have a growing agenda. For now, LUKOIL covers the energy demand of its refineries in Bulgaria and Romania and nearby residents with solar and wind power. At Bulgarian Burgas, electricity from LUKOIL’s photovoltaic power station is delivered to the national grid with a preferential tariff approved for 20 years. This is indicative of the economic and environmental benefits gained from the use of renewable energy for both company’s operation and local communities.
This year, LUKOIL celebrates its 25th anniversary. The company’s history and experience stands out as a success story – an example of how a company can move forward despite the turbulent situation in the market and global geopolitical instability.