Energy Giants Join Race For Government Funds

Four major energy companies have asked the government to lend state money on market terms to help refinance foreign debt and buy new assets abroad as they become cheaper, a top oil executive said on Tuesday.

Vagit Alekperov, president of and a major shareholder in LUKoil, said he had discussed the idea with President Dmitry Medvedev at a meeting last week.

The idea was masterminded by LUKoil, state-owned oil giant Rosneft, gas monopoly Gazprom and No. 3 oil firm TNK-BP, said Alekperov, who added that his company hoped to get between $2 billion and $5 billion in state loans.

"The reaction was positive. We hope the government will disburse this money on market terms. We are not talking here about any preferences," he said.

The four majors are joining the race for state funds after the government said it was prepared to lend $50 billion for companies to repay debt to foreign banks. The money had been raised in recent years to fuel growth at home and abroad.

Russian companies have to repay $120 billion before the end of 2009. The virtual closure of global capital markets has made state assistance almost unavoidable at a time of declining oil prices and the stock market's collapse.

Unlike Gazprom and Rosneft, the country's most indebted companies, LUKoil — with a short-term debt of $2.3 billion and a long-term debt position of $6.4 billion — is relatively safe.

But it has to fund a 1.35 billion euro ($1.83 billion) deal to buy half of Italian refiner ERG's Mediterranean plant before the end of the year.

Alekperov said state money could be used to fund this deal.

"We have the ERG project. Gazprom and Rosneft have large borrowings. Our company counts on a sum of $2 billion to $5 billion. This will allow companies to develop dynamically, plus have money to buy assets."

LUKoil's head said it would be a wise move by the state to lend money to companies, as foreign assets were becoming cheaper.

"Today we are getting a chance to buy assets, which could allow LUKoil to become a truly transnational company.

"We are getting the chance to become more aggressive."

Alekperov also said he would channel his personal income toward raising his stake in LUKoil to 25 percent, up from the 20 percent share he currently holds in the company.