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How we’re preparing for $25 oil: Lukoil CEO

With oil companies staring down the barrel of low prices, they are realising that they have to prepare for ever more drastic scenarios.


The oil storage depot at Indonesian oil company Pertamina in Jakarta
Beawiharta | Reuters
The oil storage depot at Indonesian oil company Pertamina in Jakarta

Lukoil, the Russian oil company, has stress tested its business for the oil price falling to $25 a barrel, Vagit Alekperov, the company's chief executive, told CNBC at the World Economic Forum in Davos. Brent crude was changing hands at close to $110 a barrel just a year ago, but has plummeted in recent months as the global economy performed worse than hoped, but supply continued at previous levels. On Friday, news that Saudi King Abdullah bin Abdulaziz Al Saud passed away sent oil prices sharply higher.

"We think that the current trends in the oil market and the global economy are only pushing the world oil to its lower levels. We think the crisis is only at its earliest stages and the demand situation in world market is not really conducive to oil prices going up," Alekperov warned.

Lukoil, like other Russian businesses, has been affected by sanctions imposed by Western governments since the downing of Malaysia Airlines flight MH17 over eastern Ukraine. A planned joint venture with French oil giant Total was scrapped in September. Lukoil, like other Russian companies, will also find it difficult to raise money internationally, or to repay international loans as the value of the rouble has tumbled.

"The sanctions obviously limit our access to locality and financing. And over the past 25 years, we've been heavily integrated into the international community in terms of technology and financing," Alekperov said.

"These will have a telling impact on us."

- By CNBC's Catherine Boyle in Davos, Switzerland