The crisis will peak this autumn and it will be primarily felt by the energy and farming sectors

Constantin Tampiza, general manager of Lukoil Romania, a company with sales of over one billion euros on the segment of fuel distribution says that turnover in the first six months of the year is down to half of what it was in the same period of last year, on a barrel priced at half of the value reported in the first six months of 2008. The business decline was also triggered by the decrease in the fuel consumption by 20% in the first quarter and 5% in the second, and by the fact that the Petrotel-Lukoil refinery was not operational in January and February.

“We are at the end of our rope. We cut commercial spending by seven million dollars and administrative expenses by 20%. We outsourced fuel transport, cut travel costs, sponsorships and advertising, but we did not make people redundant and did not cut wages, either. This will be the last thing I will resort to,” Tampiza says. Lukoil Romania’s boss, who has been running the local Lukoil operations for four years, says that Romania’s economy will reach the peak of the crisis in the autumn, with energy to be one of the worst hit sectors. “I believe we will see the crisis peak this autumn and it will be primarily felt by the energy and farming sectors. There is no cash and the energy sector is getting ready for winter in September and October. It needs money for that, which it does not have. Moreover, the redundancies announced in this sector will lead to a lower demand and therefore to problems for producers in every field,” Tampiza believes. This is precisely why Tampiza says that the money coming from Romania’s foreign loans has to be used mainly to create jobs. Constantin Tampiza will continue to apply the cost cutting steps taken in the first six months, given the pessimistic sales estimates, a 10% decline compared with the fuel volume sold in 2008. “Foreign loans are not for covering holes, but for creating jobs. As many jobs as possible to generate revenues to the state budget, wages for people and consumption for us. We are happy now that the inflation is low, but actually no one is buying anything. Of course the prices are going down,” Tampiza says. Energy companies will lay off about 5,000 people until 2012, with almost half of them to be made redundant this year. Lukoil Romania’s boss believes jobs can be created on construction sites, in agriculture and in services. “The services market in Romania is very weak. Which is why we are faced with very high costs,” Tampiza says. However, he says that the current Government has also taken a series of good steps the effects of which are already showing. They include supplying industrial consumers, such as those in the chemical industry only with domestically produced gas for a limited period of time, which allowed several facilities to resume operations. As a result of the cost cutting measures, Lukoil Romania’s operating income reached 29.5 million dollars in the first six months compared with the 34.6 million dollars in the corresponding period of 2008.