LukOil has got its eyes on Oltchim and Arpechim

LukOil, Russia’s largest petroleum group and one of the largest in Europe, contemplates participation in the privatisation of the Oltchim Ramnicu Valcea chemical plant, as it is interested in Romania’s petrochemical sector, Vagit Alekperov, LukOil’s chairman told Ziarul Financiar on Thursday.

He did not rule out a possible interest in the Arpechim Pitesti chemical plant also, which is Oltchim’s raw material supplier and is to be divested from Petrom and operate as a trading company 99% held by Petrom.

Oltchim has recently been put up for privatisation by the authorities again, after a number of failed attempts to privatise the company, now owned by the Economy Ministry.

LukOil posted approximately $700 million turnover for the first nine months of the year, more than twice higher than in the corresponding period of last year, company sources said, adding the Russian operator could see $900 million turnover in 2004. At this level, the Russians at LukOil are practically “splitting” the Romanian petroleum market in two. On the one hand there are three companies whose revenues are in excess of $1bn (Petrom-OMV, Rompetrol, LukOil, each of which holding large refineries and networks of over 250 filling stations) and then there is the rest of the market comprised of MOL, Shell, Agip and the private gas station operators.

Now that it has established a presence on the refinery and filling station market, LukOil is considering the possibility to expand to petrochemical business. It operates a 270 filling station network in Romania at the moment, in addition to wholesale storages. Furthermore, Petrotel Ploiesti was reopened on Thursday, after having been shut down three and a half years ago. The Russians claim they invested more than $120 million in retooling the refinery during this period so that it could produce Euro 3, Euro 4 and Euro 5 compliant fuels.

The Russian group entered the Romanian market in 1998, when it bought 51% in Petrotel Ploiesti, paying $53.2 million in addition to the outstanding debts at the time of the takeover.

“LukOil’s target is to attain a 350 filling station network in 2005 either by building new stations or by acquisitions (of already existing ones i.e.),” Alekperov explains. Petrotel’s processing capacity currently stands at about 2.5 million tonnes of crude a year, which is deemed as sufficient for the Romanian market. LukOil is also going to invest about $50 million in the next two or three years in order to rehabilitate the thermoelectric power plant that caters to Petrotel refinery’s power needs.