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. Last Updated: 07/27/2016

LUKoil to Move Into Balkans, East Europe

Top oil producer LUKoil said Thursday it is moving into the Balkans and Eastern Europe, partially because it needed more markets for its Bulgarian arm, LUKoil Neftochim.

Vice president Ralif Safin told a news conference in the Bulgarian capital, Sofia, that LUKoil was in talks about buying "big networks" of filling stations in Greece, Turkey and Macedonia, which Bulgaria borders.

"We would have liked to buy them yesterday," he said. "Talks are going on."

Neftochim is LUKoil’s biggest investment project outside Russia, Safin said, and LUKoil planned more foreign investment now that the Russian government and parliament paid more attention to the needs of the energy sector.

The Russian delegation in Sofia included LUKoil officials and several senior members of parliament.

Neftochim general director Valentin Zlatev said the refinery planned to increase processing of crude oil by 1 million tons in 2001.

Neftochim’s full annual processing capacity is 7.5 million tons. It processed 5.3 million tons in 1999. No actual figure for the last year was available.

Zlatev said Neftochim has turned to profit since LUKoil bought a 58 percent stake in the refinery at the end of 1999 for $101 million in cash and a pledge to invest $408.3 million until 2005 to upgrade it, meet environmental standards and shift to lead-free petrol.

Neftochim expected a profit of $50 million for 2000, compared to a loss of $200 million in 1999, he said. It included profits from the refinery based at the Black Sea port of Bourgas and a network of filling stations in Bulgaria.

Neftochim’s biggest problem was theft from its 740-kilometer pipeline network in Bulgarian territory, Zlatev said.

Safin also said that LUKoil was eyeing several petrochemical plants in the former Communist bloc member states. He did not name the plants, but said: "It could be Hungary, Slovakia, Czech Republic, Romania."

LUKoil was also interested in firms being privatized in Yugoslavia, Safin said without elaborating.

In October, Zlatev said LUKoil considered restoring or acquiring Serbia’s Novi Sad refinery, destroyed by NATO bombing in 1999, but one month later LUKoil president Vagit Alekperov said the Russian company was not interested.

Another possibility, Safin said, was the construction of a long-planned pipeline expected to transport Russian and Caspian crude from Bulgaria to Greece."Of course, it is a political decision, and governments involved should take a decision," he said.

"But from the economic point of view, it would be interesting for us to take part in the construction of such a pipeline. LUKoil has a lot of oil, and production is growing" said Safin.

The plan aims to link the Bulgarian Black Sea port of Bourgas to the northern Aegean Greek port of Alexandroupoulis, bypassing the Turkish Bosporus Strait. The cost of a 256-kilometer pipeline, with a capacity of 30 million to 35 million tons per year as well as storage and docking facilities in both ports, is estimated at $850 million.

But disagreements over who should build the pipeline, state versus private participation and doubts over Russia’s ability to feed it have caused delays.