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Lukoil may buy European refiners as Russia supplies less crude

OAO Lukoil, Russia's largest oil company, will be ready as soon as 2008 for “large-scale'' purchases of refineries and fuel-marketing companies in eastern Europe, which may be struggling to secure supplies of crude by then. OAO Transneft, Russia's oil pipeline monopoly, is spending about $11.5 billion to build an eastern Siberian pipeline that will divert some Russian crude to Asia from Europe. Russia's Urals crude blend, which trades at a discount to the Brent blend traded in London, may be sold at a premium when the link is finished, Lukoil Deputy Chief Executive Officer Leonid Fedun said. “Everything that will be sold in Europe at a good price and will be profitable for us, we will examine and try to buy,'' Fedun told reporters in Moscow. “Eastern European companies will be interested, to secure guaranteed supplies of our oil.'' Lukoil, which owns 1.4% of the world's refining capacity, plans to expand processing and marketing in Russia, Europe and the U.S. to sell fuel with higher added value. The company already operates refineries in Bulgaria, Romania, Russia and Ukraine. Lukoil is already examining a proposal from Slovenia's Petrol d.d., the nation's largest gasoline supplier, to set up a joint venture to market fuel in the country, Fedun said. Russian oil exporters will get more revenue, between $5 billion and $6 billion a year, if Urals starts to trade at a premium to Brent, Fedun said, citing company estimates. Urals now trades at a discount of $8 to $14 a barrel to Brent, he said. Brent for August rose 9 cents to $71.07 a barrel on the ICE Futures exchange at 2:38 p.m. in London. Urals traded at $65.70, up 32 cents, in the Baltic Sea. “There is unjustified discrimination against Russia's crude oil, Urals, and it will continue with the surplus supplies to Europe,'' Semyon Vainshtock, the chief executive of Transneft, said on April 24. “If we divert 30 million tons of oil a year from western Siberia to the east, to Asia, Europe won't receive this oil, and the market will value Urals differently.'' Lukoil expects some political opposition in eastern Europe to the company's expansion, as regional governments try to limit dependence on the Russian energy supplies. “There is serious political aspect,'' which makes it difficult to expand in Europe, Fedun said. “This is a strong antipathy for Russia and Russian companies.'' (BG)