Lukoil Sees $60 Oil in 2017

Russia's largest private oil company Lukoil expects that oil prices will be around $60 per barrel in 2017, Lukoil vice president Leonid Fedun said.

"Over the next year the price of $60 per barrel will be dominant," he said, commenting on OPEC's decision to cut production. According to Fedun, oil price hike of $10 increases Lukoil’s net profit by $2 billion, Bloomberg reported.

Lukoil increased oil output by 3.6% in 2015 to 100.7 million tons. Next year the company plans to keep the production volume in Russia at the level of 86-88 million tons. In January-September period of 2016 Lukoil cut crude production by 7.9% year-on-year to 69.301 million tons. Fedun said that the reduction of Russia's oil production by 300,000 barrels in 2017 will cause no technical problems.

"Russia has welcomed the idea to freeze and even reduce (oil production) by 300,000 barrels, which technically causes no problems. For example, in the spring Russia traditionally suspends production by 150,000 barrels due to the so-called seasonal repairs. Another 150,000 (of barrels) is in practical terms a small number of projects with a high water-cut level, which decrease the free money flow rather than increase it, so it will cause no technical problems to suspend those projects," he said.

Russia is really cutting oil output, Fedun asserted.

"We had projects for the [output] increase by another 200,000 barrels [per day]. That is, actually half a million barrels won’t reach the market. This is quite a substantial contribution," Fedun said. According to Lukoil, oil production in Russia will reach 555 million tons per year in 2017-2018, in 2019 - 554 million tons, in 2020 - 551 million tons.

The forecast indicates that the prospects for development of the Russian oil industry look uncertain due to tax burden growth.

Lukoil expects that by 2030 growing demand for oil and production decline will lead to demand for new projects at 39 million barrels per day.