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Yukos unveils oil refining, export
strategy
By John Helmer
MOSCOW - Russian expansion into the global oil
refining sector will be carefully calibrated, according
to Oleg Sheiko, executive vice president of Yukos for
corporate finance.
An Italian news report last
week claimed that a preliminary agreement had been
struck between Yukos and ENI for the acquisition of 50
percent stakes in ENI refineries at Gela, Milazzo
(Sicily), and Marghera (Venice).
Sheiko refused
to confirm the report. He said that before acquiring
low-margin refining stakes, Yukos had to get the ratio
right between the price they paid for the asset, and the
volume and value of crude oil supply, which the refinery
would take from Yukos.
Yukos produced 6.429
million tonnes last month, passing LUKoil for the first
time on the Russian oil production ladder. Output growth
at Yukos has been 18 percent this year, and is expected
to be roughly the same in 2003.
According to
Chris Weafer, oil analyst at Alfa Bank in Moscow,
Russian oil producers are under pressure to find markets
for this added output. "Every extra barrel of oil
extracted from the ground in 2003 will have to be
exported as crude or product, because of zero net
domestic growth, hence the importance of trying to
develop direct export routes to the US and Japan, and
the need for more downstream diversification into
refineries both inside and outside Russia's borders."
Weafer calculates that by mid-2003, Russia will
be exporting 1.2 million barrels per day more than it
did 18 months ago. He confirms the race to sell this oil
is global and intense.
According to Sheiko, the
over-capacity of refining in Europe this year, and the
fall of refinery margins, have generated "lots of
projects on offer for us to consider." In Italy, as
elsewhere in Europe, he told Asia Times Online, Yukos'
"first priority is to secure long-term supply contracts
for crude. Our second priority is to acquire minority
stakes in refineries, so long as that leads to the first
priority."
To establish beachheads for shipments
to its export markets, Yukos has already completed the
acquisition of the Mazheikiu Nafta refinery in
Lithuania, and has acquired a controlling stake in the
Slovak Transpetrol pipeline transporting Russian crude
into Germany. Mazheikiu cost Yukos $150 million, and
will secure an annual supply of 8 million tonnes of
crude. Another 4 million tonnes would be supplied to the
Lithuanian terminal of Butinge, Sheiko added. Revenue
from the crude deliveries will be roughly 10 times the
value of Yukos's investment.
According to
Sheiko, he turned down a bid to buy into the Greek state
refinery company "because the economics weren't there.
The refining margins were too low; and the volume of
crude supplies was not linked to the investments." He
said that a similar calculation dictated Yukos' refusal
to bid for the state stake in the Polish refinery at
Gdansk.
"We have our stand-alone project
criteria, when we must take account of our cost of
capital. The issue is to calculate the cost of
investment in relation to the value of oil deliveries."
The pressure to secure markets for its oil
output is also driving Yukos to accelerate planning to
expand Russian infrastructure for shipping oil abroad.
According to Sheiko, the two Yukos priorities at the
moment are for a new crude oil terminal at Murmansk, and
for a new pipeline to China.
Transneft, the
state pipeline monopoly, has told Asia Times Online that
it will add 100,000 barrels per day in new capacity
through its pipeline to Primorsk port, on the Gulf of
Finland, next year.
In October, Yukos began test
shipments of large tanker volumes of crude from its
terminal at Vitino through Murmansk port.
"Transportation of oil using tankers of over 100,000
tonnes from Murmansk to Europe is indeed more
cost-effective for the oil companies," commented Kirill
Portnov, an analyst at the Moscow-based Petroleum Argus
Agency.
He added that Yukos may test loading of
Very Large Crude Carriers (VLCC) at the same location.
The route from Murmansk to the United States is shorter
than the current route Yukos is using through the
Mediterranean for its monthly shipments to Houston,
Texas.
Moscow industry sources told Asia Times
Online that VLCC operations from Murmansk were likely
only if a new pipeline was built to deliver crude to the
port, and if a terminal was constructed to consolidate
deliveries from several companies and sources, and store
it before shipping.
In a few days, Sheiko said,
he would hold fresh talks with the China National
Petroleum Corporation on the planned pipeline from the
Yukos Siberian base at Angarsk to the northern Chinese
petroleum terminal at Daqing. This outlet is projected
to have a capacity of 400,000 barrels per day.
(©2002 Asia Times Online Co, Ltd. All rights
reserved. Please contact content@atimes.com
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