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RUSSIA - LUKoil Pipelines.

LUKoil is having its own 200,000 b/d crude oil export pipeline built to the port of Varandei on the Pechora Sea by 2005. Crude to be produced from the Northern Territories in partnership with Conoco will pass through Varandei as well. Construction work on the Varandei terminal has just been completed and will mostly handle crude oil produced by KomiTex and AGD. It will make an attempt to load a 20,000 ton test cargo from temporary facilities later in 2000.

The company intends to use the proposed Baltic Pipeline System (BPS) to the Gulf of Finland. It will refurbish the existing internal pipelines and build extensions to link them with the proposed BPS route.

Downstream, LUKoil is to have a new 3m t/y refinery built by late 2003 at the Mokhnatkina Pakhta oil depot in the northern region of Murmansk. It will process Timan-Pechora crudes. It has been trying since late 1999 to acquire the 380,000 b/d Norsi refinery, which is poorly equipped. In March 2000 LUKoil was reported to be have got get a majority share in Ukraine's 80,000 b/d Odessa plant and bidding to take 58% in Bulgaria's 124,000 b/d Burgas refinery on the Black Sea. In 1999 it took a controlling stake in Romania's 100,000 b/d Petrotel refinery. The company has been considering the Oriana petrochemical complex in western Ukraine.

In the retail business, LUKoil is build and upgrade 600 petrol stations in Russia and open 40 shops under the company's brand during the next five years. It intends to improve its marketing position in the Moscow region, where there are 1,848 gasoline stations mostly privately owned.

To LUKoil the retail business is very important. The group has several units marketing crude oil and products in the lower Volga, the Urals, the Caucasus and the north-west. A marketing unit is to be formed for the Black Sea coastal region around Novorossyisk.

The group has about 1,000 service stations bearing its red and silver logo. These should reach about 2,000 by 2002. LUKoil's 10% market share in Russia would be more than doubled. This will include Moscow, the most lucrative market in Russia.

LUKoil's expansions outside Russia have been rapid. They include major equities in the biggest oilfields and pipeline projects in Azerbaijan and Kazakhstan (see Review Nos. 1-5). Turkmenistan and other CIS countries are high on its list for E&P and downstream expansions.

It is also moving into Algeria, Egypt, Iraq and other countries, with Agip of Italy and BP (Arco) being its partners in most cases. Chevron, its partner in Tengiz and the CPC in Kazakhstan, is dealing with LUKoil in more than one way. In 1993 Chevron signed an eight-year contract to buy about 70,000 b/d of crudes from LUKoil, which allowed for a Japanese bank to lend the Russian company about $700m in a deal arranged by Mitsui.
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Publication:APS Review Oil Market Trends
Date:Aug 14, 2000
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