VAGIT ALEKPEROV Leader of Lukoil, one of the most influential men in the oil business and Russia's third wealthiest man met with Nacional's reporter on the 20th floor of the Lukoil business tower in Moscow, and told us about his plans to visit CroatiaVagit Alekperov, leader of the large Russian oil company Lukoil and one of the most influential men in the world oil industry is soon to visit to Croatia. Alekperov, Russia's third richest man, has been at the helm of that company for the past 15 years, and under his leadership the company has grown into a world leader, operating on five continents, employing more than 150,000 people, achieving annual profits of USD 8bn and controlling about 1.3% of the total world oil reserves. Unlike the majority of Russian oil companies, Lukoil is fully private, its stock is listed on several of the world's largest stock exchanges, and the company operates in line with Western European standards of transparency.

Serious plans in CROATIA

Alekperov is the main architect of Lukoil's emergence and development. While working as Soviet Deputy Minister of Energy, he stimulated the consolidation of the nation's oil industry, and then took the helm of one of the newly established companies, Langepas-Urai-Kogalimneft, which soon afterwards changed its name to Lukoil. Lukoil began strong commercial developmeent, and only a few years later it acquired the well known American company Getty Oil, and was thus the first Russian company to take ownership over an American company quoted on the stock exchange.
In addition to the successes he has achieved in his career, Alekperov is known as one of the few oil bosses who began his career at the lower levels, doing physical jobs on the oil wells. He was born in 1950 in Bakuu, the capital of Azerbaijan, and lost his father, also an oil man, early on. Alekperov received his first job in the oil industry already as an 18 year old, and he studied at the Faculty of Oil and Chemistry in Azerbaijan before becoming manager of oil wells in the local oil company Kasmorneft. At that time, he survived a serious explosion on an oil platform in the Caspian Sea, swimming for hours to save himself. Due to experiences such as these, Alekperov is considered to have some of the best knowledge of the oil industry.

His announced visit to Croatia is new proof of the increasing interest of this large company for its operations on the Croatian market. Even though it has been one of Croatia's chief suppliers of fuel for many years, Lukoil formally entered onto the Croatian market only last year, with the acquisition of the company Europa mil, a small chain of petrol stations. Even though Lukoil has not yet positioned itself of the domestic market as some analysts had expected, a visit by the company CEO to Croatia is a clear message that this company has serious business plans here.
This was confirmed by Alekperov himself in an exclusive interview with Nacional's reporter last week in Moscow. In the conversation held in his luxurious office on the 20th floor of Lukoil's executive tower in the centre of Moscow, Alekperov stressed several times that he is expecting a great deal from his visit to Croatia and meeting with the Croatian political leaders. He showed excellent knowledge of the situation on the Croatian oil market and left the impression that he is familiar with even the tiniest detail of company operations, despite the company's massive size.

NACIONAL: What are the reasons behind your upcoming official visit to Croatia?
- We have been operating on the Croatian market for some time now, we have a chain of petrol stations, and we have very serious plans to expand our operations in your country. I consider my trip to Croatia an opportunity to present our company to your state leaders, and to acquaint them with Lukoil's business plans. I have not yet met your president, and I am looking very forward to making his acquaintance.

SUPPLY OF FUEL FOR BOATS ON THE ADRIATIC

NACIONAL: Are there any concrete projects you are ready to invest in on the Croatian market?
- There are a series of projects, or investments, in Croatia that Lukoil is interested in. We primarily plan to invest in an expansion of our retail network. Today, Lukoil has about 20 petrol stations in Croatia, and we would like to have 100 in the next few years. This is a very serious investment cycle that we have already launched. Also, considering the very indented coastline of the Adriatic Sea, we are also expecting to supply fuel for boats. This is a part of the market that has a great deal of potential, particularly for the exceptional knowledge and experience that Lukoil has in this segment in its operations in other countries. This will be the two main aspects of our operations and investments in Croatia, though we are interested in discussions on all projects that our Croatian partners might offer. In short, Lukoil can and wants to invest in Croatia. We want to create a business environment on your market in which we can feel comfortable, and I think that this is the basic message of my visit.

NACIONAL: The Croatian media have speculated that you are interested in acquiring the oil terminals on the Adriatic coast.
- That information is not correct. For the time being, we have no plans to construct or buy oil terminals in Croatia. As far as I know, the most important terminal is owned by the national oil company, and in these circumstances, this would not be realistic. Of course, were we to get involved in this kind of business, we would likely cause an earthquake on the Croatian oil derivatives market, and that is something we want to avoid. We are open to cooperation with everyone, and through that cooperation, we want to strengthen our position on the Croatian market.

NACIONAL: Croatia is a small market. How can operating here even be important for such a large multinational company as Lukoil?
- True, Croatia is not a large market, but I think it would be wrong to view Croatia outside of the context of our broader strategy. One of the strategic goals of Lukoil is to have a strong presence in the countries of Southeast Europe. We have very developed operations in Bulgaria, Serbia and Romania, and we are also operating in Croatia, Montenegro and Macedonia. Logically speaking, this region is very important, as a series of transport routes between Europe and Asia pass through here. From that perspective, today Lukoil is the only company that offers you the possibility of travelling from one end of Eastern Europe to the other and being able to buy fuel from the same producer the entire way. Nor should we ignore the significant business results Lukoil has in wholesales, as we supply several refineries in the region with oil. Such a strong regional presence is what we want to achieve in a larger dimension. Due to its geographical position, Croatia is a crucially important part of our strategy.

NACIONAL: Have you been forced to change your plans in this regional development due to the global recession?
EVEN THOUGH Lukoil does not have state capital in its ownership portfolio, the head of Lukoil and Russian Premier Vladimir Putin work successfully together - Like all other large oil companies in the world, Lukoil is not resistant to the global recession and the large drop in the price of oil in the second half of last year. But we went through a significant process of optimisation and cutting costs. The first results of this business policy are already visible in the company results for the first six months of this year, as we achieved profits of over USD 3bn. I am very satisfied with these results, especially because during these difficult times, we did not interrupt the investments we assessed to be of strategic importance. For example, we recently completed the acquisition of a large refinery in The Netherlands, which has real potential for growth. Lukoil is one of the rare global companies with continued growth of production, and I think that our shareholders can be very satisfied with the way things are developing.

GAS FIELDS NEAR THE CASPIAN SEA

NACIONAL: Numerous Russian companies often complain about the protectionist measures that make operations more difficult in some markets of Western Europe. Did Lukoil have similar problems?
- I think that all Russian companies were faced with similar prejudices when they began operating on Western markets. These prejudices are based on the negative image that Russian companies had in the early 1990s due to the somewhat unusual way of doing business back then. But today, Lukoil is present in 42 countries around the world, including 16 European Union Member States, and so I believe that we successfully overcame those problems. We are a private company, our stocks are quoted on several world exchanges, and we have no state money in our ownership structure, so the state authorities have no influence over company operations. In fact, the second largest company stockholder is the American oil company ConocoPhillips, and our operations are subjected to the strictest world standards with regard to transparency. In all the markets in which we operate, we try to not be a disturbing factor and, to the greatest extent possible, avoid any conflicts with our competitors. This was the key to altering the negative image you mentioned, and I think that Lukoil is the best model of operations of a Russian oil company. Furthermore, we are the only Russian company to operate at a fully multinational level, and we hold a significant part of our reserves in foreign countries.

NACIONAL: Where are you developing new projects at this time?
- We recently begun development of a large gas field near the Caspian Sea. In the Russian part of that lake, we discovered a unique oil field, with a capacity of 7 billion barrels. The first commercial production in these fields should begin in March 2010. We are also expecting a great deal from our fields in Venezuela, and we are negotiating on projects in Iraq. There we currently have several oil fields of massive capacity, and I am certain that, with partners, we will win the rights to exploitation in some of these fields. Of course, the key factor in the development of new fields will be the price of oil on the world market.

NACIONAL: Does the current price of oil make this possible?
LUKOIL IN CROATIA Nikolaj Ivčikov, director of Lukoil in Croatia, has been entrusted in making Lukoil's plans in Croatia happen - I know it may be hard for some to understand, but too low of a price per barrel ultimately brings consumers more harm than good. With low oil prices, companies will not start production on more complicated oil fields that require greater investments. Without the development of these kinds of fields, which are accounting for more and more of the share of total world production, the security of supply could quickly become threatened. If this kind of situation should remain on the market, with a price per barrel of about USD 60, then I think that this might happen. For that reason, I hope that the market will soon pick up and the price will grow to a level of between USD 70 and 80 per barrel. This is a just price. On the one hand, it is not too great a burden for consumers, but allows the oil companies to have enough of a profit to finance further research.

MASSIVE INVESTMENTS IN DEVELOPMENT

NACIONAL: How much do oil companies invest in development?
- Very much. I think that the greatest changes in the oil industry in the past few decades are tied with the development of new technological solutions. Never before have so many scientific methods been used in this business as today, and such development is expensive. These kinds of investments can only be afforded by the largest world companies, like Lukoil. For that reason, there is only a small circle of companies that can invest in the future, to develop new fields. Companies that are under state ownership are fairly handicapped, and private companies have three advantages over state held ones. First are th expert staff, who continually undergo professional development, the second is the top of the line technology that private companies develop, and the third are significantly wider possibilities for financing and available capital.

NACIONAL: You have been working in the oil industry for more than 35 years, and you are one of the rare people running a global oil company who actually began his carried working in the oil fields. Does that experience help you to run the company today?
I firmly believe that managers in oil companies must have knowledge about the technological processes of production. The most important part of my job relates to making decisions about future investments, and to do so, I have to be able to have the proper picture about those projects. So, I have to realistically look at all the risks of a job, and the investment itself, and also for the people for which I am responsible. Our investments are worth tens of millions of dollars, affecting thousands and thousands of people, and so my most important task is to avoid risks. It’s all the same to me whether it is a project worth ten billion or fifty million dollars. I apply the same rule to everyone, and that is that the risk must be as little as possible. I think my experience in production makes my job a lot easier.

DANGER ON OIL PLATFORMS

NACIONAL: However, there is information that this experience almost cost you your life. People often retell the tale of how you barely survived during an explosion on the oil platform in the Caspian Sea that you were working on.
- There are interesting stories and anecdotes in the life of every oil men who, like me, started his career in lower ranked positions. Even though I am always working to increase the safety on our production platforms, accidents do happen. When they do, we try to ensure that their impact is as little as possible, and that as few human lives are threatened as possible. Unfortunately, we can never completely avoid accidents, and believe me that for workers on oil platforms, the sight of crude oil means danger. When everything is in order, they never see the oil, but once they do, that means that something on the platform has malfunctioned and they are in danger of an accident.