Russia's Lukoil keen to expand upstream presence in Africa: official

Russia's biggest independent oil producer Lukoil is looking to expand its presence in African upstream, as the Kremlin looks to forge closer ties with the continent, a company official said Oct. 6.

"We are hoping to invest more in African oil gas projects next year," an official from Lukoil's international upstream business told S&P Global Commodity Insights. "We are keen to expand our business in this continent, as there are many opportunities for us especially due to the current situation [Russia-Ukraine war]. Even our traders are selling more oil to African countries."

The development comes amid worsening ties between the West and Russia, after the latter invaded Ukraine. The war in Ukraine, which is now in its eighth month, has forced West-based oil companies to reassess their business with Russian oil and gas, with some already opting for alternative oil supplies. This has pushed Russia to increase its global influence, especially in the oil and gas space in regions such as Asia and Africa.

Lukoil has been active in Africa since 1995 and operates in Egypt, Nigeria, the Republic of Congo, Ghana and Cameroon. Lukoil has also signed a memorandum of understanding with Equatorial Guinea, which lays the ground for the Russian producer to explore and produce hydrocarbons in the African OPEC member.

Russia-Africa ties

Russia's influence in Africa during the Soviet Union/Cold War era was very strong, but since then its influence has been on the wane, with China emerging as the dominant investor in the continent.

Africa is already a major producer of key commodities, but with its population and economies growing steadily, the continent is also emerging as a major demand hub. As a result, commodities sector will be at the heart of Russia's push towards Africa.

Russia's pivot to the Middle East in the political and business sphere has yielded more power to Russian President Vladimir Putin, and the president is looking to cement better tires with Africa.

Litasco, the trading arm of Russia's second-largest oil company Lukoil, has already moved some of its trading teams from Geneva in Switzerland to Dubai in the UAE, as more of Moscow's oil flows east in response to Western sanctions.

Litasco, which is not subject to Western trade sanctions or other measures on Moscow in response to Russia's invasion of Ukraine, has seen its European business dwindle as many buyers and refiners in the region have sharply cut their dependence on Russian oil. Prior to Russia's invasion of Ukraine, Litasco would trade around 3 million b/d of crude and refined products, including Russian and non-Russian origin oil.

Russia's key export grade Urals has continued to trade at hefty discounts to other crudes in recent months as this key grade has lost its main customers in Europe.

Platts, part of S&P Global, assessed medium sour grade Urals at $70.620/b on Oct. 5, which is a discount of $23.10/b to the key Dated Brent crude benchmark.