January 29, 2006. Copyright, 2006, Graphic News. All rights reserved

Russian tiger in your tank

LONDON, January 29, Graphic News: Within the next three weeks RussiaÕs largest oil company, Lukoil, will begin to establish a market share in Europe with the acquisition of a petrol station network from ConocoPhillips.

The European Commission for Competition has set a deadline of February 21 to consider the deal which, if given the green light, will see 383 service stations in six European Union countries switch from ConocoÕs Jet brand to Lukoil.

The acquisition is LukoilÕs latest move in its campaign to carve out a presence for itself in the EU. But unlike GazpromÕs heavy-handed efforts to barge its way in -- the Kremlin-backed giant threatened it would cut energy supplies if MoscowÕs expansion plans in the EU were curtailed -- Lukoil has employed a more subtle approach.

According to LukoilÕs Vice-President, Leonid Fedun, the ConocoPhillips deal will increase sales of the companyÕs oil products by almost a fifth (19%). The deal sees Lukoil buying 156 stations in Belgium, 83 in Poland, 49 in Finland, 44 in the Czech Republic, 30 in Hungary, and 14 in Slovakia. The acquisition will give Lukoil a market share of 8.3% in Belgium and 29% in Finland.

Lukoil grew out of state-owned energy company Langepas-Urai-Kogalymneft, founded in 1991 by 41-year-old Vagit Alekperov, acting minister of fuel and energy in the last Soviet government. In April 1993, Langepas-Urai-Kogalymneft became Lukoil, with Alekperov as its CEO. Lukoil then muscled in on the biggest deals in the oil- and gas-rich Caspian Sea basin. Within seven years, Alekperov had moved Lukoil into the United States, buying Getty Petroleum Marketing. 

Skillfully playing the political field, Alekperov has stayed in good standing with Russian President Vladimir Putin, ensuring backing of his vision to transform Lukoil from a national oil company to an international oil giant. In 2004, the Putin government sold its remaining 7.6% stake in Lukoil to Houston-based ConocoPhillips in a $1.99bn deal.

Lukoil closed the biggest deal in its history in 2005 when it bought Nelson Resources, a leading independent British exploration and production company operating in Kazakhstan, for $2 billion. In 2006 ConocoPhillips boosted its stake in Lukoil to 20%.

Employing more than 150,000 people, today Lukoil has reserves second only to Exxon, has operations in 25 countries outside Russia, owns eight refineries and a total of 5,830 petrol stations, including 2,000 in the U.S. In 2006 the company posted revenues of $46.28 billion.

Vagit Alekperov currently ranks 37th on the Forbes magazine WorldÕs Richest list with a net worth of $11 billion.
/ENDS