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. Last Updated: 07/27/2016

Transneft Expects to Post Loss for '98

Russian pipeline monopoly Transneft said Thursday that it expects earnings and profits for 1998 to drop in comparison to the previous year because of the nation's economic turmoil.

Preliminary figures put revenues at 16.1 billion rubles ($708.3 million), 7.3 percent lower than in 1997, and pre-tax profits at 3.1 billion rubles. Net profit will be about 2 billion rubles.

Transneft President Dmitry Savelyev blamed the government's ruble devaluation last August and the resulting inflation for the company's performance.

"Profits shrank because we kept our fees at the same level despite inflation," Savelyev said.

He added: "We believe that in 1999 we will set up a better way to price our services, making them more transparent for oil companies."

Transneft holds 2.54 billion rubles worth of unpaid bills and its own debt is 2.79 billion rubles, 71 percent of which is owed to suppliers and contractors.

Transneft pumped 295.9 million tons of oil last year, of which 283.6 million tons came from Russia, 9.5 million from Kazakhstan and 2.8 million from Azerbaijan, the company said.

A total of 141 contracts were signed.

The biggest Transneft client was oil giant LUKoil with 60.8 million tons, followed by Yukos with 44.3 million tons and Surgutneftegaz with 34.9 million tons.

Savelyev also said that the Prosecutor General's Office is still investigating the company's former management in a privatization dispute that led to the arrest of a stake in the firm last year.

The prosecutor's office took 12.5 percent of Transneft's privileged shares, which had been sold to the Benevent company, to investigate what it said was a suspicious sale.

"The General Prosecutor's Office is investigating the case and I believe that shortly we will find out the results and will understand what should we do with the part of the privileged shares," Savelyev said.

The remaining privileged shares, equal to 25 percent of all shares, remain in private hands. The 75 percent voting stake belongs to the state, and the government has no plans to sell it off. In the beginning of December, the Fuel and Oil Ministry asked the State Property Ministry to keep the stake from being privatized, and the officials are preparing the necessary draft for a decree to that effect.

In other accomplishments for 1998, Transneft said it spent 5.3 billion rubles to add 283 kilometers to its 46,800 kilometers of pipelines and replace 590 kilometers of pipe. Some 590 kilometers of pipe were also repaired.

Looking toward 1999, the company intends to invest 3.3 billion rubles into the modernization of pipelines and building of 289 kilometers of new pipe.

Construction should also start on the Baltic Pipeline System from Kharyaga to the Primorsk port in the Gulf of Finland, Savelyev said. The company will consider extending its two Druzhba branches - a northern route to Poland and Germany and a southern pipeline to Yugoslavia - and pipelines to China and within Iran.

The number of accidents at Transneft's pipelines dropped from 0.23 per 1,000 kilometers in 1993 to 0.96 in 1998.

Savelyev said the company plans to set up a system to monitor the pipe's stability by next year that will help prevent accidents.