Bloomberg News

Lukoil Shelves $1.8 Billion U.S. Shale Deal After Gas Slumps

March 01, 2012

An employee wears a branded jacket on a platform above the Lukoil-Nizhegorodnefteorgsintez petroleum refinery, operated by OAO Lukoil, in Nizhny Novgorod, Russia, on Thursday, Dec. 15, 2011. Photographer: Andrey Rudakov/Bloomberg

An employee wears a branded jacket on a platform above the Lukoil-Nizhegorodnefteorgsintez petroleum refinery, operated by OAO Lukoil, in Nizhny Novgorod, Russia, on Thursday, Dec. 15, 2011. Photographer: Andrey Rudakov/Bloomberg

OAO Lukoil, Russia’s second-largest oil producer, shelved a plan to make a $1.8 billion shale acquisition in the U.S. because of slumping natural-gas prices.

The producer backed away from the plan because it didn’t offer an acceptable return, Deputy Chief Executive Officer Leonid Fedun said. U.S. natural-gas prices slumped 55 percent between June and January. Lukoil had set aside $1.8 billion for the deal, according to the company.

“We examined this project in detail and had to suspend its development on valuation,” Fedun said in an interview in London today. “We’re not ready to complete it.”

Drillers including Chesapeake Energy Corp. (CHK), the second- largest U.S. gas producer, have cut back production at shale fields after increased supply and milder-than-usual winter weather sent prices crashing. The number of gas-drilling rigs working in the U.S. is at a three-year low.

Fedun said Lukoil is looking at a plan to sell shares in Hong Kong and Shanghai next year, without saying how much it hopes to raise.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus