Monday, December 6, 2010

Rompetrol to Focus on Balkan, CIS as Parent Boosts Production

Dec. 3 (Bloomberg) -- Rompetrol Group NV, Romania’s second- biggest oil company, will exit Albania to focus on more- profitable Balkan and former Soviet states as its Kazakh parent company seeks markets in which to sell its increased output.

The Amsterdam-based company, which is wholly owned by KazMunaiGaz National Co., will close its four Albanian units it and increase activities in Georgia, Moldova, Bulgaria, Ukraine, Serbia and its home market in Romania, Rompetrol Chief Executive Officer Saduokhas Meraliyev said in a Nov. 26 interview.

KazMunaiGaz, which pumps a quarter of Kazakhstan’s oil output, is working to raise oil production to 25 million metric tons by 2015 from 18.7 million tons last year. A stronger presence in the Balkans and elsewhere in east Europe, through its Rompetrol subsidiary, and in Asia will help the company boost profits, said Meraliyev.

“We decided to streamline our operations” to focus on more-profitable markets, Meraliyev said. “This restructuring project touches our activities in five countries and all the business entities there, and 2012 is our target to accomplish that.”

Kazakhstan’s state-owned oil and gas company bought 75 percent of Rompetrol Group, which was valued at $2.7 billion, in August 2007 to gain a “footprint in important downstream markets in Europe,” and double its refining capacity. In 2009, it bought the remaining 25 percent from the previous owner, Dinu Patriciu, Romania’s richest man, according to Forbes.

Loan Payback

The Kazakh owner is pressuring Rompetrol to return to profitability as a $1 billion loan approved last year has to be paid back by August. Chief Financial Officer Dmitry Grigoryev said in a Nov. 19 interview that the Romanian unit will miss the break-even target for next year, posing a group loss of about $40 million for that year.

To help improve its productivity, Rompetrol plans to use as much as $350 million by October 2011 to upgrade its Petromidia refinery, which is 45 percent owned by Romania, and boost capacity to 5 million tons per year from 3.6 million tons now.

Domestically, Rompetrol has “huge ambitious plans,” he said. It plans to have 170 gas stations of its own by 2014, compared with 131 now and 800 points of sale with its distributors and partners. That compares with its main competitor, OMV Petrom SA, which has a total network of 546 distribution stations, and OAO Lukoil of Russia with 310 stations, he said.

Expansion ‘Idea’

“Our idea is to expand, especially in Bucharest,” Meraliyev said. “Now we are struggling to get the construction permits.”

Across the Balkans, the group owns 48 units. It is seeking to cut the size of the network by merging or closing 14 companies “in the near future,” he said.

It also plans to upgrade a terminal for loading and uploading oil in Bulgaria, where it has “very good results,” and is looking at the possibility to increase its capacity if the Kazakh owner approves a plan to enter the Serbian market, Meraliyev said.

“ There is some intent by the Serbian government to open the gasoline market, which is prohibited today because they use the products from Serbian refineries,” said Meraliyev. “Already we have prepared a short list of three potential partners for that.”

‘Attractive Market’

Rompetrol also wants to increase its activities in Ukraine, which is a “very attractive market,” though it has problems with loading and unloading products in that country’s ports, he said. It is also satisfied with developments in Georgia and plans to increase the number of gas stations in Moldova to 60 by the end of next year from 40 stations now.

The company is ready to support a planned $3.5 billion oil pipeline from the Black Sea port of Constanta to Trieste in Italy, he said, and plans to use its existing marine terminal in Navodari as a starting point for the project.

In 2007, Serbia, Croatia, Romania, Slovenia and Italy agreed to build the 1,400-kilometer (870-mile) pipeline. Rompetrol can accommodate 24 million tons of oil per year through that terminal and needs only 5 million tons for its own production, said Meraliyev. The rest can be sold off to other local producers.

“It’s our dream, it’s my dream and we share our vision with the authorities,” Meraliyev said.

--Editors: James M. Gomez, Douglas Lytle

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net Irina Savu in Bucharest at isavu@bloomberg.net;

To contact the editor responsible for this story: James M. Gomez in Prague at jagomez@bloomberg.net

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