Today LUKOIL Board of Directors has been held in Moscow. It approved key figures for the Company’s budget and investment program for 1999 and set out guidelines of its overseas activities.
The budget and investment program have been shaped up in an environment of low oil prices, system crisis of the Russian economy, increased budget deficit, lower demand, destabilisation of all elements of financial and banking sector, unavailability of borrowed capital and a number of other unfavorable factors which negatively affect the Company’s current and future financials.
At the same time the Board of Directors has pointed out that LUKOIL’s financial position could be positively influenced by changes in the monetary and export policy of the state as well as cost cutting measures and improvement of the management control system pursued by the Company.
Given a high uncertainty of the economic situation in this country and instability of international oil prices, the Company planning and budget parameters have been set up in various scenarios on the basis of key economic indicators evaluation and depending on dollar exchange rate and international oil prices.
While a well-defined Government program aimed at changing the regulatory framework of taxation in the Russian oil sector is still not in place, all basic calculations related to tax liabilities and payments, with an exception of excise tax rates for crude and gasoline, are provided in accordance with the current taxation system.
In 1999 LUKOIL plans to provide 16.8 billion rubles of internal cash flow for financing capital expenditures.
Speaking at the Board meeting LUKOIL President Vagit Alekperov said that the main objective for 1999 is creation of financial environment for maintaining and increasing, to the possible extent, oil production and refining as well as ensuring the Company’s ability to pay. Vagit
Alekperov said that he is confident that taxation system of the Russian Federation will be drastically changed soon and this will allow Russian oil companies to avoid sharp drops in hydrocarbon production.
LUKOIL Board of Directors has set out guidelines for the Company’s overseas activities expansion. Over 10 months of 1998 overseas hydrocarbon production totaled 1.026 million tons of crude and gas condensate and 327.1 million cubic feet of natural gas. The Company plans to focus its efforts on boosting production at Karachaganak and Kumkol fields in Kazakhstan and Azeri, Chirag, Gyuneshli fields in Azerbaijan. LUKOIL is also interested in increasing its stake in the development of Tenghiz field in Kazakhstan. It is an intention of the Company to follow up cooperation with the National Oil Company of India (ONGC) and National Iranian Oil Company (NIOC).
LUKOIL overseas activities will be mainly concentrated on the following:
- expansion of activities in the projects under development;
- participation in new upstream projects;
- participation in new transportation projects.
Expansion of LUKOIL overseas activities is a factor which will contribute to stabilisation of the Company’s production activities in general.
LUKOIL Board of Directors appointed Mr. Anatoly G. Kozyrev as Vice President in charge of Economics and Planning. Mr. Kozyrev has been acting as Deputy Minister for Fuel and Energy since 1993 and has been a member of LUKOIL Board. Mr. Kozyrev was born on May 23, 1942. He graduated from the Moscow Engineering and Economics Institute as an energy engineer and economist in 1971 and the Foreign Trade Academy as an international economic relations specialist in 1982. From 1991 to 1993 Mr. Kozyrev headed the Credit and Finance Department of the Ministry for Fuel and Energy.
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