Lukoil, Russia's second-largest oil producer, said this week that its second-quarter net profit dropped 16 percent from a year ago to $1.9 billion due to a rise in export duties and cost inflation but its cash-flow is good as sales rose to $25.8 billion from $20.1 billion a year earlier, driven by higher oil prices. Oil production remained flat at 24 million tons while total oil and gas output advanced 2 percent in January-June compared to a year ago. The total production growth was driven by an advance in Lukoil's gas projects in Kazakhstan and Uzbekistan, analysts at Swiss bank UBS said in a note.

The company will also benefit from a tax concession for its Caspian Sea fields and it is preparing to bid for the rights to exploit the giant Trebs and Titov oil fields in Russia's arctic Yamal Nenets region.

"Trebs and Titov are very interesting and we will take part in the auction," said the company's Vice President Leonid Fedun.

Fedun also said that the company does not plan to buy back the entire remaining 11.61 percent of its shares from current owner ConocoPhillips.

"We will not use the whole Conoco option," he said.

Lukoil agreed with ConocoPhillips to buyback 7.6 percent from the 20% stake they held for $3.4 billion, and included in the terms of the deal are a 60-day option to acquire more stock in the company held by Conoco.

Lukoil has recently secured $1.5 billion in financing from a consortium of six banks.

The banks involved in the financing are said to be  Citigroup Inc., Bank of Tokyo-Mitsubishi UFJ Ltd., ING Groep NV, Natixis, Royal Bank of Scotland Group Plc and WestLB AG.

Vagit Alekperov, the chief executive of LUKoil, said Tuesday in an interview with Reuters, that the Russian government was ready to introduce tax breaks for oil extracted from its Korchagin fields in the Caspian Sea from Jan. 1.

Unlike greenfields in East Siberia being developed by competitors Rosneft and TNK-BP, LUKoil's Korchagin field does not currently benefit from tax breaks on export duties.

LUKoil has been lobbying for export duty breaks for its Korchagin field after launching production there in April and spending more than 40 billion rubles ($1.3 billion) over 15 years to get it commissioned.

"There was a meeting [in the Russian government], and there was a decision to introduce a tax break for the Korchagin field from Jan. 1," Alekperov said.

The field will produce 2.5 million metric tons of crude per year, or about 50,000 barrels per day, at peak production. This year, its crude output is expected to be 343,000 tons.

Alekperov told Reuters he expected tax breaks for Caspian Sea production to be the same as those for new East Siberian deposits, about 70 percent less than regular crude oil export duty.

Analysts say tax breaks on exports from the technically challenging and investment-heavy Caspian fields are crucial for the profitability of the company, whose oil production has been falling so far this year.

LUKoil plans to launch the largest of its Caspian deposits, the Vladimir Filanovsky field, in 2014 or 2015. Annual output there is expected to reach 10.5 million tons.