RusEnergy

05-24-2005 Reuters - By Dmitry Zhdannikov and Richard Mably - Oil major LUKoil has suspended talks on buying foreign refineries, including in Germany, because high operating margins have raised asset prices too high, a senior LUKoil executive said Monday. Russia's largest oil producer still wants downstream assets in Europe and the United States, but will bide its time until the price is right, first vice president Dmitry Tarasov said in an interview. "For vertical diversification certainly we need some refining in Europe and the U.S," Tarasov said. "But refining margins are very high so prices are too high now. We are not negotiating with any company, there is nothing for sale." In March, Tarasov said LUKoil was interested in buying into Ruhr Еl, the German refining assets belonging to Venezuela's state oil giant Petroleos de Venezuela, or PDVSA. Last year, LUKoil was offered the chance to buy into refining and retail in Italy, France, the Czech Republic, Bosnia, Croatia and Slovenia, Tarasov had said previously. LUKoil's only remaining viable option for now in refining is Lithuania's Mazeikiu. Yukos wants to sell its 53.7 percent stake in the Baltic states' only refinery as it faces ruin under a $27.5 billion tax claim in Russia. But Lithuanian Prime Minister Algirdas Brazauskas said last week that he favored TNK-BP as a potential buyer for the Yukos stake in Mazeikiu. "Everybody knows that we were thinking about buying Mazeikiu since the beginning," said Tarasov, referring to a past failed bid by LUKoil for the plant. Tarasov also denied industry reports that LUKoil was talking to PDVSA about buying parts of its U.S. refining assets, Citgo. He said negotiations with PDVSA were focusing on upstream activities. LUKoil wants to invest up to $1 billion in oil projects in Venezuela, the world's No.5 crude exporter. LUKoil's president Vagit Alekperov, now visiting Caracas, has said LUKoil was considering supplying crude to Citgo, which uses 1.1 million barrels per day. Tarasov also said LUKoil and its new U.S. partner ConocoPhillips, which has an 11 percent stake in the Russian firm, were focusing mainly on upstream activities in Russia although downstream discussions had also begun. "We have a big retail portfolio in the United States and Conoco is one of the leaders in U.S. refining. So we are looking for possible synergies," Tarasov said. LUKoil has 2,200 filling stations in the United States.