Lukoil boss says Czech refineries not a priority

The largest private Russian oil company’s priorities are consolidation of current refining capacity and expansion in Spain, boss says

Oil industry veteran and Lukoil co-founder Vagit Alekperov is said to be one of Russian Prime Minister Vladimir Putin’s closest allies in the business world | na serveru Lidovky.cz | aktuální zprávy Oil industry veteran and Lukoil co-founder Vagit Alekperov is said to be one of Russian Prime Minister Vladimir Putin’s closest allies in the business world | foto: © ReutersČeská pozice
Oil industry veteran and Lukoil co-founder Vagit Alekperov is said to be one of Russian Prime Minister Vladimir Putin’s closest allies in the business world

Vagit Alekperov, the CEO of Russia’s largest privately-owned oil company, Lukoil, says its lack of refining facilities in the Czech Republic is preventing the company’s further expansion in the country. Nevertheless, he says acquisition of a stake in a Czech refinery is not high on the agenda; Lukoil’s top priority in Europe now is to optimize production at refining facilities it already owns, consolidation in Italy and Croatia — and expansion in Spain.

“The situation in the Czech Republic is different because we don’t have our own [refinery] plant here. In a way, this puts the brakes on development,” Alekperov, who is in Prague this week, said in an interview with Czech Television (ČT) aired on Wednesday.

“Conditions on the market are changing, and we have focused attention on our global problems in order to deliver oil we have extracted to refining plants which are available,” Alekperov said, explaining Lukoil’s loss of interest in acquiring a stake in top refinery Česká rafinerská, which is majority owned by Unipetrol (itself controlled by Polish petrochemicals major PKN Orlen).

Nevertheless, he does not altogether rule out buying into Česká rafinerská, which operates the two major refineries in the Czech Republic in Litvínov in the northwest, and Kralupy nad Vltavou 25 kilometers north of Prague. “But if the economic situation and the circumstances for such an investment are advantageous, we will make such an investment,” Alekperov said.

“If we are to talk about further expansion, from a strategic point of view it [the acquisition of a refinery stake in the Czech Republic] is not a necessity, but it’s more about effectiveness and economic considerations,” Alekperov told the public broadcaster. “Currently, there are 9 refining plants [in which Lukoil has a stake] in Europe and most of them are working at 70 percent of capacity, therefore the right time for the acquisition of such a plant [in the Czech Republic] has already passed,” he added. (Meanwhile, Česká rafinerská minority sharehold Eni is in talks with another Russian energy giant, Gazprom, about the sale of its stake; Unipetrol may exercise its right of first refusal.)

Alekperov said that consolidating markets in southern Europe, first and foremost Italy and Croatia, and expanding its business in Spain are now the priorities in Europe. Nevertheless, the Lukoil boss stressed that the Czech Republic is still of high strategic importance for his company. “The Czech Republic is one of the key transit countries for transit [in Europe] and for this reason we want to be present in this country. We are interested in increasing the number of filling stations, but this is about effective use of potential expansion,” Alekperov said.       

When asked about exploration and extraction, Alekperov said the Caspian Sea region and West Africa are the company’s priority regions. “The situation in the Caspian Sea region is unique. We’ve already begun operations there, the work is very successful and [our] extraction is considered to be the cleanest ecologically,” Alekperov said, adding that Lukoil plans to build refining and chemical plants and invest $24 billion in the region over 10 years. He says Lukoil estimates its Caspian fields to contain up to 7 billion barrels of crude.

Lukoil currently operates 43 filling stations in the Czech Republic and has a lucrative contract dating back to 2007 to supply around 50 percent of state-controlled Czech Airlines’ (ČSA) aviation fuel requirements at Prague’s Ruzyně international airport. The deal was controversial because no other firms submitted offers for the contract, reportedly due to lack of information about it.

A presidential meeting?

Lukoil sponsored the translation and publication in Russian of Czech President Václav Klaus’ book “Blue Planet in Green Shackles,” which challenges the widely accepted scientific findings that climate change and global warming is caused by humans, and Alekperov allegedly has close ties with the Czech President. Alekperov and Klaus met secretly in Prague in late 2007 and again in November 2008.

The two met secretly in Prague in late 2007 and again in November 2008 without the knowledge of the government at the time led by Mirek Topolánek (Civic Democrats, ODS), which was informed of the meeting by the Czech intelligence agency BIS. It is not clear, however, whether Alekperov met with Klaus during this latest visit.

“There was no such reception at the [Prague] Castle,” the Czech President’s spokesman, Radim Ochvat, told Czech Position via SMS. Nevertheless, following their previous meeting in Prague in 2008, Ochvat had refused to confirm the meeting took place on the grounds that he only comments on the president’s official engagements.  Klaus left Prague for an official visit to Rome on Wednesday.

Alekperov is in Prague for a meeting of Lukoil representatives in Europe, the oil firm’s press service in Moscow told Czech Position. “The meeting is of a purely technical nature,” a company spokesman said.