First Oil: End of an era for a Russian oil and gas icon

Amidst the crush of energy, financial and wartime news, you might have missed a significant milestone within Russia’s oil and gas industry. Indeed, on April 21, now-former Lukoil CEO Vagit Alekperov resigned from that company. Alekperov, 71, decided to resign from his 29-year tenure as Lukoil’s only CEO, after he was sanctioned by Australia and the UK. 

By resigning, Alekperov hoped to protect Lukoil’s operations from any negative impacts. Yet, he is one of the old Soviet Union’s greatest success stories, rising from relatively humble beginnings to become a Russian oligarch and an oil and gas icon. 

Early potential. Born in Baku, Azerbaijan, on Sept. 1, 1950, Vagit Alekperov followed in the footsteps of his father, who worked in the Azeri oil fields but died when the younger Alekperov was still a boy. The son graduated from the Azerbaijan State Oil Academy and went to work in the Caspian Sea oil fields, offshore Azerbaijan. In 1979, Alekperov moved to Western Siberia, to work for Surguneftegaz, gaining a reputation as an expert manager in the field and earning greater responsibilities. In 1985, he went to the Bashneft production association, serving as deputy general director. By 1987, he was general director of newly created Kogalymneftegaz. 

Government service. Alekperov’s growing reputation did not escape the Kremlin’s attention. Accordingly, in 1990, he was named the USSR’s First Deputy Minister of Energy at age 40. Subsequently, Alekperov played a major role in forming Lukoil (which stands for Langepas, Uray and Kogalym oil) as a state-owned enterprise via USSR Council of Ministers Decree No. 18 on Nov. 24, 1991. The new company merged three oil production associations, along with a processing company and two refineries. 

Part of Alekperov’s motivation in founding Lukoil was a belief that for the USSR/Russian oil and gas sector to compete with Western operators, it needed to copy their business model. This required vertically integrating the industry’s three sectors: E&P, refining and distribution. 

At Lukoil’s helm. On April 5, 1993, Lukoil was transformed from a state enterprise to a private, open joint-stock company, based on a Presidential Decree issued in November 1992. At that point, Alekperov left the government and became Lukoil’s president, CEO and chairman. 

By all indications, Alekperov over the years was masterful in building Lukoil into a major player. He also owned 10.4% of the company by 2002, and his net worth as of his resignation was estimated by Forbes at $19.3 billion. In addition, he helped to construct the working relationship between OPEC and the Russian government and its operators, better known as OPEC+. Russia owes a lot to Alekperov. 

On a personal note, in 1991, this editor met Alekperov briefly, when he brought a Soviet/Russian delegation to Houston, to recruit U.S. investment in Russia’s industry. What struck me about Alekperov was that he was a highly intelligent individual. He also was calm and cool. He reminded me of the late, long-tenured president of Yemen, Ali Abdullah Saleh, who I met when oil production first started there, and who exhibited similar traits. It will be interesting to see what Alekperov does next. 

OTC makes a comeback. For the first time in three years, the Offshore Technology Conference (OTC) returned to its normal timeframe during the first week of May. OTC attracted its usual mix of operator, service company and drilling contractor attendees. And while OTC released a final attendance figure of just 24,000, it was still more than double the attendees at last August’s makeshift event.  

OTC said that its exhibition area increased from last August to 258,645 sq ft. In all, 1,064 companies from 39 countries exhibited. Although attendance was nowhere near pre-pandemic levels, it appeared that the industry professionals that really needed to attend were there. Furthermore, the attendees exhibited a palpable sense of optimism. That’s something that OTC can build on for next year.  

About the Authors

Kurt Abraham

World Oil

Kurt Abraham kurt.abraham@worldoil.com