John Bowker

Russian oil major LUKOIL is to switch its focus from higher production to an increase in free cash flow, and will use the extra revenue to buy back shares and pay dividends.

The company, Russia's second biggest oil producer, said on Thursday it would change its strategy for 2010-2019 in light of the global economic crisis which has caused a drop in demand for oil.

It said it would boost cash flow via the spin-off of less efficient assets, geographical diversification and modernising oil refineries, among other measures.

It added that dividends and buy-backs were a priority. LUKOIL paid out 42.5 billion roubles ($1.48 billion) to shareholders as part of its 2008 results -- 19 percent higher than the previous year.

"The company acknowledges that the era of growth is over and it is time to reap the profits of past years while capping investments," analysts from Metropol brokerage said in a note.

LUKOIL, 20 percent owned by U.S. producer ConocoPhillips, said it would report the full details of the new plan next month.

Its shares closed down 2.4 percent on Thursday. ($1=28.71 Rouble)