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Alliance Plans to Reduce Upstream Capital Expenditures

Source: www.gulfoilandgas.com 1/29/2013, Location: Asia

For 2013, Alliance Oil Company plans to further reduce upstream capital expenditures to 250-290 MUSD and focus on organic development of production assets in all regions, launching gas production in the Tomsk region and evaluating exploration potential in the Timano-Pechora region.

Downstream capital expenditures are budgeted at 430-490 MUSD, essentially in line with 2012 investments, to increase capacity and complete the hydroprocessing complex at the Khabarovsk refinery, to connect the refinery to the East Siberian Pacific Ocean pipeline (ESPO) and to continue expansion in the Russian Far East wholesale and retail market. Upon completion of major investments in 2013, the Company expects to reduce downstream capital expenditures significantly.

Upstream

As previously announced, Alliance Oil Company’s objective for the upstream segment in 2013-2015 is to extend the Company’s track record of double digit growth in production and reserves. The upstream strategy focuses on realizing exploration and development potential in Timano-Pechora, expanding in the highly attractive Russian gas industry and progressing the upstream joint venture with Repsol.

For 2013, consolidated upstream CAPEX is expected to be reduced to 250-290 MUSD and fully funded from the segment’s operating cash flow. In total the Company plans to drill 64 production and 4 exploration wells in 2013. In Timano-Pechora, the capital expenditures program focuses on further development of the Kolvinskoye field and evaluation and testing of the Company’s expandedresource base, following the recent license acquisitions in the region. The Company schedules to commence gas production in the Tomsk region in early 2013.

Downstream

In the downstream segment, a new hydrocracker and other hydroprocessing units are expected to be launched into test operations in the third quarter of 2013. Currently, the project progress is estimated at above 95% in engineering and procurement, and 79% in construction works. Refining capacity is planned to be increased from 90,000 bopd to 100,000 bopd in 2013.

The Company has started to construct a connection from the ESPO to the Khabarovsk refinery. The first crude supplies to the refinery by ESPO-pipeline are expected in the beginning of 2014 with 40,000 bopd and then gradually increases to reach up to 100,000 bopd in 2015. The expansion of the Company’s wholesale and retail network in the Russian Far East will continue.

Total consolidated downstream capital expenditures are planned at 430-490 MUSD, essentially in line with 2012 investments, and will be fully funded from the segment’s operating cash flow, existing cash and debt sources. Upon completion of the hydroprocessing complex, the refining capacity increase and the ESPO connection in 2013, downstream capital expenditures and funding requirements are expected to be significantly reduced going forward.

For more information about related Opportunities and Key Players visit Caspian Region Projects

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