LUKoil Predicts Oil Prices May Fall Late This Year

While answering questions on June 24 during an on-line press conference, Vagit Alekperov, President of Russia's LUKoil oil corporation, stated the following, 'Our principal objective for the years 2002 and 2003 is to cut our costs. We hope the measures we are taking may result in our cost of producing 1 barrel of crude falling below USD 3'. Mr. Alekperov also said, in 2003, the corporation expected total investments of up to USD 3 billion. Of that 80% is supposed to pay for prospecting and extraction, 15% invested in refining, and the remaining 5% used for the further development of retail networks.

In 2001, LUKoil's extractable oil reserves increased by 11.7%, reaching about 4 billion tonnes or 29.2 billion barrels. Over that year, 966 new wells became operational and 17 new oil fields were discovered. The amount of investments increased by 44% on the year.

'By the end of this year', Mr. Alekperov continued saying, 'we expect a certain drop of oil prices to between USD 20 and 22 per 1 barrel. We believe such prices to fit our budget quite well. Of course, we would not mind higher prices yet this is what is realistic to expect'.

Mr. Alekperov also said Russia's gasoline prices had practically stopped growing and there was even a tendency toward their decrease. According to him, in the fall, these prices could drop by about 10%. 'What I am saying', he added, 'Russia's oil companies now function in a market environment and have to deal with competition. We all can guarantee that our consumers will always have our products'.

The LUKoil oil corporation was registered in 1993. Its statutory capital of about USD 686,000 is divided into 850,563,255 common shares. The corporation is primarily engaged in prospecting for, extracting, and refining oil and gas and wholesaling and retailing petroleum products. The corporation accounts for 24% of all crude oil extracted and 18% of it refined in the Russian Federation. The corporation and its subsidiaries are audited by the KPMG company.

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