RusEnergy

06-01-2006 RBC News - Nafta Lendava, Slovenia's only oil refinery could be sold to LUKoil before the end of this year
LUKoil, Russia's leading oil producer, plans to buy and reconstruct Nafta Lendava, a Slovenian refinery. The director of Nafta Lendava, M. Dominko, confirmed that a delegation from LUKoil had visited the refinery to inspect it. Slovenia's Economy Ministry also confirmed that LUKoil was interested in Nafta Lendava and was in talks with Slovenian authorities to buy it. Slovenian Economy Minister Andrej Vizjak, a member of Slovenia's delegation to Moscow, told RBC Daily that the refinery would be sold before the end of this year, noting that LUKoil was not the only bidder. The company's financial reports would be published soon, and a public tender would be held after that, Vizjak said. LUKoil has not commented on the issue.
Nafta Lendava is Slovenia's only oil refinery. The capacity of the company, which is fully owned by the government, is estimated at about 600,000 tons a year. Slovenian Economy Minister Andrej Vizjak said LUKoil had a good chance of winning the Nafta Lendava tender, thanks to its ability to ensure long-term and reliable supplies of petroleum products to the refinery. "LUKoil has long been expanding its operations in Eastern Europe. It owns the Burgas Oil Refinery and 120 gasoline stations in Bulgaria. LUKoil also controls Beopetrol, Serbia's second-largest chain of gasoline stations (178 stations), Petrotel oil refinery and about 280 gas stations in Romania. LUKoil has invested about $50 million in the construction of 30 gas stations, oil storages and transport infrastructure in Macedonia.
Slovenia is seen as the richest among the republics of the former Yugoslavia, and its economy is growing apace. It is very attractive to investors, but Russian companies has had little opportunity to buy businesses there as most of them are owned by the state.
Shortly before the visit of the Slovenian delegation to Moscow, LUKoil President Vagit Alekperov visited Ljubljana and met with Slovenian Prime Minister Janez Jansa. Slovenia confirmed LUKoil's interest in the acquisition of Nafta Lendava, the Luka Koper port operator and the Petrol gas station chain. A controlling interest in Luka Koper is held by the government, and its investment funds KAD and SOD control about 29 percent of Petrol. The Slovenian media says LUKoil has also showed interest in Slovenia's coast infrastructure, planning to build an oil transportation center there.
Andrei Gromadin, an analyst at Russia's MDM Bank, says LUKoil has long been eyeing oil refineries and gas stations in Eastern Europe. "The company already has oil refineries in Bulgaria and Romania, and it is buying new gas stations abroad. Slovenia is one of the richest Balkan countries, and many European companies want to expand there. The largest oil refineries of the former Yugoslavia are in Croatia and Serbia. Not so long ago LUKoil made a bid for a 25 percent stake in Croatia's national oil company INA, but failed, and the asset went to Austria's OMV. Now, it wants to buy a Slovenian refinery and reconstruct it, getting a foothold on the Balkan market. Other large European traders could also bid for Nafta Lendava, including Hungary's MOL and Poland's PKN Orlen, which has just purchased the Lithuanian refinery Mazeikiu Nafta, and Austria's OMV. "Political and corporate management agreements play an important role in privatization tenders like this, and LUKoil has a good chance to win," Gromadin believes.
Sergei Suverov, at Gazprombank, says LUKoil is focusing on the Balkan market, attracted by lower competition and higher margins there. "There is a global deficit of oil refining facilities, and LUKoil's interest in regional expansion is justified," he noted. Suverov said LUKoil would have to invest tens of millions of dollars in Nafta Lendava. LUKoil could be in a better position than other bidders because it would guarantee stable oil supplies to the refinery," the analyst stressed. "LUKoil might hold talks on Nafta Lendava together with ConocoPhillips," he suggested.