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. Last Updated: 07/27/2016

Alfa Group Targets Ukraine Oil Firms

Further strengthening its positions in Ukraine, Alfa Group has mapped out expansion plans into Russia's neighbor's oil industry, news agencies reported this week.

Alfa Group hopes to take over the Lugansk region's Linos refinery, which has an annual capacity of 18 million metric tons, and the Oriana petrochemical factory in the Ivano-Frankovsk region, Prime-Tass quoted Alfa Group chairman Mikhail Fridman as saying.

Sources at Tyumen Oil Co., which is part of Alfa Group, confirmed the company was interested in expanding its business into Ukraine, but no official statements followed Tuesday.

Analysts said Tyumen Oil could end up in a clash with LUKoil, which has twice expressed its interest in taking over Oriana.

"Linos is attractive because of its size, but Oriana is simply a prize asset," said Dmitry Avdeyev, oil and gas analyst with United Financial Group.

Linos' debts are estimated at $320 million, while Oriana owes its creditors $250 million, part of which are debts to Westdeutsche Landesbank and Bayerische Vereinsbank issued to finance modernization of Oriana's fixed assets.

German insurer Hermes in December threatened to suspend its investment projects in Ukraine if the government does not pay a fine on the guaranteed loan to Oriana.

Several companies, including LUKoil, British Leavsley, German Kl?ckner and Hungarian Tiszai Vegyi Kombinat, have expressed interest in buying a controlling stake in Oriana.

LUKoil intended to strengthen its positions in Ukraine and committed to plow $150 million to $200 million into modernizing Oriana on top of $100 million already spent on the purchase of the Odessa refinery and the gasoline station network in the Crimea.

"Alfa Group has traditional interests in Ukraine, above all in relation to its sugar business," said Ivan Mazalov, oil and gas analyst with Troika Dialog.

Alfa Group's trading arms Alfa Eco and later Alfa-Sugar focused on wholesale transactions with sugar, tea and oil products long before the holding acquired Tyumen Oil Co. in 1997.

Tyumen Oil could now be heading toward a head-to-head clash with LUKoil, which in January scoffed at Tyumen Oil's plans to begin exploring an oil field in the northern Russian Timan Pechora region, a major resource base for LUKoil after its acquisition of KomiTEK last year.

LUKoil on Tuesday confirmed its strategic interest in buying a controlling stake in Oriana, playing down allegations that it would have to compete in a rat race with Tyumen Oil for the Ukrainian market.

Alfa Group's growing appetite resulted in a quiet acquisition of Ukrainian Kievinvestbank last week.

Russian oil companies' activity in Ukraine followed resumption of oil exports to the republic after the Fuel and Energy Ministry suspended them at the end of last year.

The ministry confirmed Tuesday resumption of exports was related to privatization of major Ukrainian companies, while LUKoil said the Ukrainian government had threatened to review LUKoil's ownership of the Odessa refinery if the oil supply was not turned back on, according to Prime-Tass.

Tyumen Oil Company - Alfa-Group's major asset - increased output 1.8 percent last year to 20.06 million tons and hopes to boost output to 24 million tons in 2000, acquiring new fields and making new investments. Tyumen Oil's second large shareholder is Renova, a front company that represents foreign ownership in the company.


Alfa Group

Alfa Bank Classical banking

Alfa Capital Investment banking

Alfa Eco Wholesale trading in sugar, tea

Alfa Cement Cement

Alfa Sugar Sugar

Alfa Estate Real estate

Alfa Art Art trading