An aerial view shows an oil derrick and other facilities of an oilfield, part of the Imilorskoye group of fields, near the town of Kogalym, western Siberia. Russia’s No 2 oil producer Lukoil launched the oilfield in western Siberia ahead of schedule yesterday, a major step in its drive to prop up falling production and to weather US sanctions over Ukraine.

Reuters/Imilorskoye Field, Russia

Russia’s No 2 oil producer Lukoil launched an oilfield in western Siberia ahead of schedule yesterday, a major step in its drive to prop up falling production and to weather US sanctions over Ukraine.

The US imposed sanctions on Lukoil and other Russian energy companies last month, preventing US firms from supporting the Russian firms’ activities in exploration or production in deep water, Arctic offshore or shale projects.

The sanctions have also limited the companies’ access to Western capital markets.

“The field is launched, though there are difficulties with raising financing,” chief executive officer Vagit Alekperov told reporters at the snow-covered Imilorskoye field.

The Imilorskoye group of fields, where the launch ceremony was held, is 250km from the town of Kogalym. The group has extractable oil reserves of 194mn tonnes (1.4bn barrels), and was originally due to be launched in March 2015.

West Siberia is at the heart of Russia’s oil industry, the world’s largest by output. However, oil production there has been on the decline as fields become depleted.

Lukoil, Russia’s largest non-state oil company and controlled by Alekperov and his deputy Leonid Fedun, managed to halt a decline in oil production last year after three straight years of decreasing production thanks to new assets in Russia.

Alekperov said time and investment were needed for Russia to replace the Western technology it cannot now import due to US and EU sanctions over Russia’s role in the Ukraine crisis.

“In all these years we acquired ... oil production equipment from abroad, from the US as well as from Europe, Japan and other countries. Time and sufficiently serious resources will be needed for our industry to replace them,” he said.

Deputy Prime Minister Arkady Dvorkovich, in charge of energy and commodities, said the government would support the construction of new oil pipelines and talks with banks, including Asian lenders, for financing.

“We will support the companies ... by working with financial institutions that resisted the temptation of imposing sanctions, most of all with the Chinese People’s Republic,” he told reporters.

Alekperov said due to Western sanctions on equipment, supply Russian companies should speed up the development of traditional oilfields to boost oil output in the future.

Lukoil plans to produce 200 tonnes of oil per day at the field this year. In 2015, it plans to produce 300,000-400,000 tonnes, while in five years annual output is set to reach 3mn tonnes with a future maximum annual production of 5mn tonnes.

The company’s investments in the field are set to reach 100bn roubles ($2.5bn) in 20 years, Alekperov said. He did not specify the concrete period.

Lukoil’s oil production stood at 90.8mn tonnes in 2013. The company expects output to stabilise this year.

Ukraine may ask Stockholm court for interim ruling on Russian gas

Kiev may appeal to the Stockholm court of arbitration to fix a temporary price for Russian gas and conditions for deliveries to Ukraine if an interim gas deal is not reached soon with Russia, Ukrainian Prime Minister Arseny Yatseniuk said yesterday.

The European Union is trying to broker a deal to resolve a standoff between the two countries after Russia shut off gas deliveries to Ukraine in June over what it said were more than $5bn in unpaid bills.

Ukraine faces the possibility of energy shortages this winter if no deal is reached, risking a replay of the disruptions to Europe’s gas supplies seen in 2006 and 2009.

Kiev is waiting for a final decision from the Stockholm court on an appeal it lodged last June for a review of a 2009 deal between Ukraine and Russia’s Gazprom which set a price of $485 per thousand cubic metres — way above the market level.

Meanwhile, the European Commission is seeking to get Russia and Ukraine to sign an interim agreement as a step towards resolving the long-standing price row.

And though Russia and Ukraine have agreed a price of $385 per thousand cubic metres under a proposed interim agreement, the two countries have not agreed conditions for delivery or a time frame for the price to be effective.

Yatseniuk, speaking at a government meeting on Wednesday, reiterated that Ukraine was still 5bn cubic metres of gas short of what was needed to see the former Soviet republic through the winter.

He said Ukraine could continue to work with the European Commission on the interim agreement or, if no such deal could be reached, it could ask the Stockholm court to step in with a provisional ruling “to set the price and conditions for deliveries of natural gas” until it delivered its final verdict.

Russia is Europe’s biggest supplier of oil, coal and natural gas, and its pipelines through Ukraine are a political focus as Europe imposes sanctions on Russia over its seizure of Crimea.