Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Alekperov Disturbed By Large State Firms

The head of oil company LUKoil said Thursday he was worried by the growing clout of state-controlled energy companies.

The unusually forthright remarks by LUKoil president Vagit Alekperov appeared as market rumors are mounting that Russia is preparing to set up a new state oil giant based on the current assets of Rosneft.

Rosneft has transformed itself from a midsized company into the country's largest oil producer, overtaking LUKoil, after acquiring assets of bankrupt oil firm Yukos in a series of auctions organized by the state.

Industry insiders said the Kremlin might be working on wrapping more assets into a single company that would produce more oil and gas than global majors Mobil or BP.

"The growing strength of state companies is a concern," Alekperov said. "We do not want there to be a divide between private and state companies. I think that all companies should be national companies."

LUKoil is seen as one of the safest plays among Russian stocks as its management is loyal to the Kremlin and the company is 20 percent owned by U.S. ConocoPhillips.

Analysts say the link with Conoco would give it some protection against any potentially unfriendly move by the state, given the possible political ramifications such a move could generate in the United States.

Alekperov, one of the country's richest men, said he would continue to build up his personal stake in LUKoil.

The company said July 3 that Alekperov had paid $1.4 billion to buy 18.3 million shares. As of April, Alekperov owned 16.9 percent and vice president Leonid Fedun owned 8.3 percent of LUKoil, which has a market value of $62.7 billion.

LUKoil's partnership with Conoco stretches beyond the equity tie-up. The two firms are working on a project to produce up to 250,000 barrels per day in the northern Timan-Pechora area, which will be exported via a new Barents Sea terminal.

Alekperov said the project would come on stream in the spring of 2008.

The two companies also want to sign a deal with the government of Turkmenistan by the end of the year on blocks 19, 20 and 21 on the Caspian Sea shelf, he said without elaborating.

Alekperov also served notice to his German refining customers, who recently suffered cutbacks in Russian crude supplies, which LUKoil preferred not to operate through trading intermediaries that control the export route.

In July, LUKoil cut supplies to Germany by one-third, and Alekperov said Thursday that it was due to a pricing dispute with trader Sunimex, a monopoly importer of Russian crude for Germany's refineries of BP and Shell.

n The Natural Resources Ministry's Federal Service for the Inspection of Natural Resources Use said Thursday that it would seek the withdrawal of licenses belonging to five oil companies, including a unit of LUKoil.

Inspections turned up "substantial violations of the license agreements," the ministry said. The companies listed are LUKoil Zapadnaya Sibir, Bell Oil, Kalmistern, Recher-Komi and Vakhgeo.