Lukoil, Russia’s second-largest oil producer, reported a net profit of $6.4 billion (590.2 billion Russian rubles) for the first half of 2024, marking a 4.6% increase compared to the same period last year. The profit boost was primarily driven by higher sales volumes, the company announced on Thursday.
Strong Financial Performance
Lukoil’s net profit exceeded the average analyst estimate compiled by the Russian news agency Interfax. The company’s revenue surged by 20%, reaching $47.3 billion (4.333 trillion rubles), supported by elevated oil prices and increased sales. In addition to the rise in net profit, Lukoil’s operating and pre-tax profits also saw growth in the first half of the year.
Operational Setbacks Amidst Growth
Despite the financial gains, Lukoil faced significant challenges in both its upstream and downstream operations this year. The company was compelled to reduce some of its oil production due to the OPEC+ agreement, to which Russia is a signatory.
Furthermore, Lukoil’s refining operations have been disrupted by emergency repairs following a series of drone attacks by Ukraine on Russian oil processing facilities and depots. In January, the NORSI refinery in Nizhny Novgorod, one of Russia’s largest with a capacity of approximately 340,000 barrels per day (bpd), had to suspend operations due to technical issues. This facility was again impacted in March when it caught fire following drone attacks.
Impact of Drone Attacks on Russian Refineries
The Ukrainian drone strikes, which escalated in early 2024, have had a profound impact on Russia’s refining capacity. By the end of March, these attacks had taken an estimated 14% of the country’s refining capacity offline. Given that most major Russian refineries utilize Western technology, repairs to damaged equipment have become increasingly challenging due to sanctions and limited access to necessary parts.
Tragic Incident at Komi Republic Refinery
In early June, a fire broke out at a Lukoil-operated refinery in the northern Komi Republic, resulting in the deaths of two workers. The Russian Ministry for Emergencies later confirmed that the fire occurred during routine technical maintenance conducted by a contracting company.
Despite these operational challenges, Lukoil’s ability to post a significant profit highlights the company’s resilience in the face of external pressures. However, the ongoing geopolitical tensions and the impact of sanctions on Russia’s oil sector could pose further risks to its operations in the months ahead.
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