LUKOIL Group power generating companies
Capacity Output in 2011 Name Location Installed electric generating capacity, megawatts Installed heat capacity, Gcals/hour Electricity, million GWh Heat, thousand Gcals OOO “Volgogradenergo” Volgograd 1,153 4,862 3,423 5,874 OOO “Rostovenergo” Rostov-on-Don 592 2,790 1,657 4,539 OOO “Kubanenergo” Krasnodar 744 781 4,077 1,165 OOO “Astrakhanenergo” Astrakhan 490 1,899 2,556 2,185 S.C. «LUKOIL ENERGY&GAS ROMANIA» Ploiesti, Romania 61 452 207 710
LUKOIL Energy & Gas Bulgaria
Burgas,
Bulgaria 257 1,548 180 703
LUKOIL Energy & Gas Ukraine
Odessa,
Ukraine 18 50 45 18
Total 3,524 12,382 12,601 15,194
LUKOIL Group’s new business sector , Power Generation, was created in 2008 as part of the Group’s Strategic Development Program, and the sector has a special role to play in the Group’s updated Strategy for 2012–2021. Power Generation will be an important factor for growth of cash flow and shareholder value in the long term.
The business comprises all aspects of power generation, including delivery and marketing of electrical energy and of heat produced at power plants. The nucleus of the sector is the Russian power generating company, UGK TGK-8, which was acquired by LUKOIL Group in 2008, but it also includes companies producing electricity and heat at Company refineries in Bulgaria, Romania, and Ukraine. This business sector provides energy both for the Company’s own needs (in the Exploration & Production and Refining & Marketing segments) and for external power and heat customers in the Southern Federal District of Russian Federation.
Structure of LUKOIL’s Power Generation business
Structural transformations
From January 1, 2011 hydroelectric stations owned by OOO “LUKOIL-Rostovenergo” and OOO “LUKOIL-Kubanenergo” were transferred to the new company, OOO “LUKOIL-Ecoenergo”.
In August 2011 Dagestanenergo was sold by LUKOIL Group as part of final procedures for sale of power assets in the Republic of Dagestan.
Electricity and heat generation
Companies in LUKOIL Group’s Power Generation sector generated about 12.6 billion kWh of power in 2011. Total supplies of heat were 15.2 million Gcal, including 13.8 million Gcal. Levels of production were dictated by conditions on the market for electricity and heat energy
Work continued in 2011 under the Capacity Provision Agreement, to which LUKOIL Group subscribed when it acquired assets during reorganization of RAO UES (the former Russian power sector monopoly). Combined-cycle facilities in Astrakhan Region (110-megawatt capacity) were brought into operation, and launch of a 410-megawatt combined-cycle generator is scheduled for 2012 in Krasnodar. These two facilities, with combined capacity in excess of 500 megawatts are only the first stage of LUKOIL’s ongoing work for modernization of Russian energy facilities and capacity increase in energy- deficient regions. Other projects in the Southern Federal District in fulfilment of the Capacity Provision Agreement are now being developed, and LUKOIL is committed to building 900 megawatts of generating capacity in total.
Liberalization of the wholesale market for electrical energy and capacity entered its concluding stage in 2010 and these markets were fully liberalized in 2011. However, government regulation continues to have significant impact on the power generating sector. Amounts of electrical and heat energy, which the Government requires to be sold at regulated tariffs remains substantial (up to 35% of outputs by some generators). In 2011 electricity and capacity was sold at regulated tariffs to households and other consumers with equivalent status.
LUKOIL-Electric Networks LUKOIL- Astrakhanenergo LUKOIL- Volgogradenergo LUKOIL- Rostovenergo LUKOIL- Kubanenergo LUKOIL-TsUR Astrakhan Energy Supply
Company
Generation Transport Marketing
LUKOIL- Ecoenergo TD-Energoservice LUKOIL-TTK International LUKOIL-Energo Engineering Service
LUKOIL Energy & Gas Bulgaria
LUKOIL Energy & Gas Romania LUKOIL Energy & Gas Ukraine
LUKOIL- Stavropolenergo
OAO “LUKOIL” is rapidly developing its own electricity generating facilities at oil & gas fields, enabling the Group to substantially reduce electricity purchases and increase the rate of associated gas use by using it to generate electricity at gas-fired facilities. The Group has total small- generating capacity of 549 MW. Electricity generation at company facilities in this sector were 2,201 GWh in 2011, representing 17.3% of total consumption of electricity in production operations.
Electricity supply arrangements have been made more secure by use of the latest technologies in investment projects for construction and reconstruction of the Group’s own generating facilities. Use of new technologies also enables to limit spending on its electricity needs, through improvement of energy efficiency and use of the Group’s own refined products as generating fuel.
Energy-saving technologies
LUKOIL works constantly to improve reliability of its electricity supply arrangements and to reduce spending on energy. These efforts have been coordinated through corporate programs for energy saving and improvement of the reliability of power supplies.
An energy-saving Program for LUKOIL Group organizations was approved for 2011 and for the period of2012-2013. The Program is prepared on the basis of proposals by LUKOIL Group organizations with the objective of limiting and reducing energy consumption in hydrocarbon production and refining, petroleum product marketing, petrochemicals, power generation and transportation. Energy savings of $35 million were achieved in 2011 thanks to the Program.
In 2011 LUKOIL Group developed an energy efficiency policy, which coordinates actions in this sphere throughout the Group. The policy defines progressive solutions and indicators for equipment quality, application of which will be compulsory in planned future projects. All investment projects and programs were subjected to expert analysis to ensure their compliance with criteria of energy efficiency and use of the latest energy saving solutions.
Rational use of electricity substantially reduces Group spending on energy resources. An automated information and measurement system for industrial metering of electricity use has been installed and is operational at all Company subsidiaries. The system enables reduction of spending on electrical energy by most advantageous use of tariffs that are differentiated according to the time of day, by greater accuracy of metering, and by enabling purchase of electrical energy and capacity on the wholesale market.
During 2011 LUKOIL addressed issues connected with installation of an energy management system and certification to the ISO 50001 international standard ‘Energy Management Systems – Requirements and Guidance’. Risks, viability and cost of the system were assessed, a provisional schedule and road map for implementation were prepared, and pilot projects were selected.
Renewable energy
LUKOIL specialists appreciate the huge potential of resource and energy savings, which is offered by alternative sources of energy. Priority types of alternative renewable energy include hydro, wind, solar and geothermal energy. LUKOIL is developing alternative energy in partnership with international companies, which are already engaged in this sphere. In 2011 LUKOIL rapidly developed cooperation in the field of renewables with the Italian company, ERG Renew, which has extensive experience in construction and operation of renewable energy facilities. A working group of LUKOIL Group and ERG Renew is designing a number of wind-energy projects in Bulgaria, Romania, Ukraine and Russia. First priority has been given to renewable-energy power stations in countries where the Company has strong operating presence and where there is administrative and economic support for renewable energy at government level. This particularly concerns projects for wind power stations in Bulgaria and Romania.
In Uzbekistan the Company is working on a project for construction of a solar power station with 100 megawatt capacity in association with the Uzbek Government and the Asian Development Bank.
At the end of 2011 a 1.25 megawatt photovoltaic (solar) generating facility was brought into use at a fuel-fired power station belonging to LUKOIL in Bulgaria. Estimated annual production of electricity is
about 1,500 megawatt-hours. Operation of the solar power facility will substantially reduce environmental impacts.