When the former Soviet Union was dissolved, public oil companies were established. One of those, Russia’s largest oil company LUKOIL, has been examined in this thesis. The purpose of this thesis was to assess LUKOIL’s short and long run competitiveness in 1996, and also to discuss the future competitiveness on the international market. LUKOIL’s production costs, tax expenses and the political and economical situation in Russia have been examined. The model used to asses the competitiveness of LUKOIL was the Supply Analysis Model. Short and long run production costs have been calculated from secondary data. The conclusion is that LUKOIL was competitive both in the short and the long run. The most critical question is the future tax level. The political-economical situation is very important for LUKOIL’s future situation. LUKOIL can be highly competitive on the world market if the Russian tax level is lowered down to Western levels.