Photographer: Andrey Rudakov/Bloomberg

Lukoil Sees 2015 Spending Above $9 Billion, Scaling Back Program

  • Planned investment cut by more than 25% from previous forecast
  • Oil company basing next year's budget on crude at $50 a barrel

Lukoil PJSC, Russia’s largest non-state oil producer, expects spending to top $9 billion this year, a decline from its earlier plan to invest about $12.5 billion.

Spending over the next two years will also hover around $9 billion before rising to $10 billion in 2018, Chief Executive Officer Vagit Alekperov said Thursday in Moscow.

Vagit Alekperov

Vagit Alekperov

Photographer: Andrey Rudakov/Bloomberg

Oil producers around the world have canceled projects, cut staff and scaled back investment programs to weather a collapse in prices. Benchmark Brent crude has dropped almost 40 percent in the past year after the Organization of Petroleum Exporting Countries decided to defend market share instead of reducing output amid a global supply glut.

Lukoil’s budget next year is based on oil at $50 a barrel and on an exchange rate of 66 rubles to the dollar, Alekperov said. Brent is currently trading at about $37.50 a barrel in London.

Lukoil’s oil and natural-gas output will total 126 million metric tons this year, with crude accounting for 95.5 million tons of that volume, according to the CEO. Total production will edge higher to 127 million tons in 2018, when the company’s budget assumes oil at $60 a barrel.

“Not withstanding output declines in West Siberia, output will be stabilized with other projects,” Alekperov said. For Russia to maintain production requires “colossal” investment and a favorable tax system, he said.

Russia, which relies on oil and gas for almost half of its budget revenue, has repeatedly broken post-Soviet production records this year as drillers benefit from a weakening ruble and the nation’s tax system helps counter lower prices. Plans to increase the tax burden on energy companies have divided politicians.

Lukoil plans to present its 10-year strategy in April or May.