Lukoil Billionaire Fedun Sees Damage From Ruble Countered by Oil

Leonid Fedun, the billionaire deputy chief executive officer of OAO Lukoil (LKOH), said any negative effect on the second-biggest Russian oil company from the rising ruble is being countered by gains from crude prices moving in tandem.

“The stronger the oil price, the higher the ruble,” Fedun said in a Bloomberg Television interview yesterday. “It’s very comfortable for an oil company, because our expenditure is in rubles but our profits are in dollars.”

The ruble has risen 8 percent against the dollar since June 1, and Brent crude prices gained the same amount. Russia is the world’s biggest oil and gas producer, and the industry accounts for half of the nation’s tax revenue. Lukoil plans to use record profit last year to boost output 18 percent by the end of 2015.

The Moscow-based company is counting on its deposits in Siberia, the Caspian Sea, Iraq and Uzbekistan to spur growth.

“In the U.S. or the North Sea, oil output is about 50 percent of potential resources,” said Fedun, the second-largest shareholder in the company after Chief Executive Officer Vagit Alekperov. “In Russia, it’s about 20 percent. We have huge potential to increase production at our oil field without any additional spending on infrastructure or pumping.”

Explorers will probably look to the Arctic before turning to Russia’s shale oil and gas deposits as the country still has untapped conventional resources, Fedun said. Total production will be little changed for 10 to 15 years, he said. Lukoil is currently barred by the government from exploring in the Arctic.

Lukoil isn’t threatened by an agreement by state-backed OAO Rosneft (ROSN), Russia’s biggest oil company, to buy TNK-BP, the third- largest, almost doubling its production, Fedun said. “We like the government and the government likes us,” he said. Neither will Venezuelan President Hugo Chavez’s death hurt the company’s operations in the Latin American country, the deputy CEO said.

Lukoil will consider raising the proportion of profit it pays as dividends to investors next year when investment demands ease, Alekperov said yesterday. It will look to raise the ratio to 30 percent in the mid-term from 23 percent in 2012, he said.

Fedun was nominated to Lukoil’s board in February.

To contact the reporters on this story: Ryan Chilcote in London at rchilcote@bloomberg.net; Brian Swint in London at bswint@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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