A source from LUKoil told RBC that the company will be able to survive, even despite the US sanctions applied against it. But the company will be forced to significantly cut its investment program and it may also lead to production decline.
“We will be forced to stop drilling of horizontal wells, because we need mainly US technologies for that. We will be able to do without them for a while. But it will be hard to upgrade oil refineries in time, because majority of the technology for manufacture of high-octane petrol is imported from Europe and US. As far as onshore oil and gas production is concerned, we have our own pumps and we can deliver drilling technology from China,” said LUKoil manager.
In order to reduce production decline, we need tax remissions for the industry from the government. These could be both short-term and long-term measures. The long-term measures could include tax remissions and introduction of tax on financial result.
At the end of August 2014 LUKoil Vice President Leonid Fedun said that the company plans to reduce the capital costs by $2 billion. He said this is connected with some uncertainty at the market, because of the western sanctions and “low oil prices.”
