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Moscow — * Renews interest in West Africa * Expects Mexico Block-12 contract in 2-3 months * Studying fields for Iraq's fifth licensing round in May * Continues talks with Iran despite political turmoil; scraps oil swaps

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Russia's second-largest crude producer Lukoil is ready to expand itsupstream portfolio with new or recently acquired assets both in Russiaand abroad, including in Iraq, Iran, Mexico and West Africa, as it seeksto replace its reserves to maintain crude production levels, CEO VagitAlekperov said Friday.

"Yes, we are looking today at the projects that would allow us tocompensate for the volumes we produce," he told reporters in a briefing."Our own geological exploration allows us to replace about 70%-75% ofthat production. The remaining 25%-30% is a question of acquisitions."

Lukoil plans to direct 20% of its total 2018 investments, estimated flaton the year at Rb550 billion (around $9.7 billion), to internationalprojects, he said, adding those investments will not be reconsideredregardless of the OPEC/non-OPEC deal in place.

"We are not changing our investment program based on short-term decisionsto cut production. We understand it is of a short-term nature. But theinvestment cycle in the oil industry is rather long, so we will continuegeological exploration in order to maintain and multiply our reserves,"he said.

While maintaining its key focus on Russia, where it produces around 1.65million b/d, Lukoil sees great potential in its existing and potentialnew African assets, Mexico's Block-12 exploration and development licensethat it won last year and which it expects to sign a contract on in twoto three months, expanding on existing projects and entering new ones inIraq and Iran, as well as cooperating with Kazakhstan on Caspianprojects, Alekperov said. WEST AFRICA

The growth points include assets in West Africa, where Lukoil is making acomeback after it quit a number of projects including in Ghana, Coted'Ivoire and Sierra Leone in 2015.

The company now considers the region one of its priorities and isboosting its activity in Cameroon and Ghana, and may consider buying intonew already-producing assets in Nigeria, Alekperov said.

"We are working today at the provinces of West Africa. We made a range ofmistakes there, which gave us experience. Today, these projects arerather well structured, our geologists understand ... their geology andhave competencies in these countries. So this is our priority," he said.

In Cameroon, where Lukoil holds a 30% stake in the Etinde licenseoffshore Limbe, which it acquired in March 2015, the company has taken aninvestment decision to drill two wells for geological exploration, hesaid.

While the company abandoned plans for an LNG project in Cameroon in early2016, "there are new opportunities arising for gas processing, so theproject is rather good," Alekperov said.

In Ghana, where it withdrew from the offshore Cape Three Points block in2015 having discovered no commercial hydrocarbons reserves, Lukoil hasretained one block developed jointly with Hess and is preparing proposalsto the government to transition to the front-end engineering design stageand start development, he said.

"We have formed a block that is economically efficient. So far, we areonly discussing the plan of how to present the feasibility stage toGhana's government," he said.

The company has also started talks on potentially acquiring stakes fromBrazil's Petrobras in two Nigerian fields, where it holds a 16% stake inthe Akpo field and a 13% stake in the Agbami field, he said.

The discussions have just begun, however, and it is too early to givedetails or say whether that will happen, as Lukoil is looking forattractive project economics, Alekperov told S&P Global Platts after thebriefing.

"We are studying all possibilities. For us today, outside of Russia, theeconomic indicators have to be higher than we have had here in Russia.When I say higher, I mean 15-20%. In Nigeria, they are so-so," he said.

Unlike Lukoil's other African assets, Akpo and Agbami are alreadyproducing fields, which would mean an immediate return on investment.

Lukoil, which is already working on a project with Chevron in Nigeriawhere the two found commercial crude reserves in 2015, expressed interestin additional assets in the country last year, when Alekperov traveled tothe African country. MIDDLE EAST

Lukoil is continuing to look at expanding its upstream operations in Iraqand Iran, as well, Alekperov said.

In Iraq, where it already operates its key foreign asset, the West Qurna2 field, Lukoil is negotiating with the government on conditions forfurther development of the field that would double its production to800,000 b/d in 2024, he said.

Lukoil has presented its plan for production under the second stage,which besides volumes and timeframes includes the indicators that wouldimprove the economics of this project, he reiterated.

The company is also considering participating in Iraq's license tenderfor new assets in May, he said.

"We bought the material for license round five in Iraq, and we will studyall the fields. No investment decisions have been taken. We have timetill May for our specialists to evaluate how well it reflects ourstrategy," he said.

The company has also completed 2D and 3D seismic exploration at recentlydiscovered field at Iraq's Block 10, where it holds a 60% operating stakein a joint venture with Japan's Inpex, and is "happy with the resultsreceived."

The results prompted the Iraqi government to expanded the block'sgeography because the field stretches beyond the limits previously setout, he said, adding the company plans to start drilling at the blocknext year.

The company is continuing talks with Iran on entering the Mansouri andAb-Teymur fields, despite recent political instability in the country,but seeks high economic returns for additional risks, Alekperov said.

"We believe in this situation, the project's economics must be aboveaverage," he said.

Lukoil presented Tehran with its proposals on the fields' development,and the discussion process is ongoing, he said.

"The situation is very difficult. But we do not stop for politicalfactors. If there were some political restrictions, we would try toovercome them. But today, there are no such restrictions. The onlylimitations today are the projects' economics and the form ofmanagement," he said.

Lukoil has, meanwhile, given up on the idea of oil swaps with Iran asuneconomic, Alekperov said.

"The trading operations we wanted to do in the form of swaps between theCaspian and the Persian Gulf are unfortunately uneconomic. The conditionsthe Iranian side has offered do not satisfy the economics of ourprojects," he said. The company previously said it was interested inresuming the oil products swaps with Iran that it was engaged in beforesanctions were imposed on Iran over its nuclear program.

Lukoil's other trading operations with Iran include joint projects inShah-Deniz in Azerbaijan and separate local operations in crude sales andtheir delivery from Iran.

--Nastassia Astrasheuskaya, nastia.astrasheuska@spglobal.com --Nadia Rodova, nadia.rodova@spglobal.com--Edited by Lisa Miller, newsdesk@spglobal.com