Lukoil to consider restarting Ukraine chems ops within two weeks

07 March 2013 17:00  [Source: ICIS news]

LONDON (ICIS)--Lukoil is to consider restarting operations at Ukraine-based chemicals subsidiary Karpatneftekhim “within the next two weeks”, following negotiations with the country’s government, the president of the Russian oil giant said on Thursday.

Speaking at a press conference in London, Lukoil president Vagit Alekperov said he had been in negotiations with the Ukrainian government about various issues surrounding the facility – understood to include the cost of importing raw materials and feedstocks from Russia - and is hopeful of resuming production at the site within a fortnight.

“As soon as the economic [conditions for Karpatneftekhim] are more favourable, we will restart production,” Alekperov said.

“We will consider launching operations [at the site] within the next two weeks,” he added.

Production at Karpatneftekhim, one of the largest petrochemical producers in Ukraine, has been idled since maintenance on the site was completed in November 2012.

Sources told ICIS at the time that the facility was unlikely to restart before the end of 2012, and the vagueness over when the facility is likely to restart continued into the new year.

According to Alekperov, Ukraine’s government has also had questions about Karpatneftekhim’s privatisation process and other legislative issues. Those difficulties were exacerbated for Lukoil by the economic issues surrounding the business.

Karpatneftekhim warned last year that its production units could remain idle unless the Ukrainian government introduces a 6.5% import tax on polyvinyl chloride (PVC). The company has also called for Ukraine to allow the import of feedstock products from Russia free of import duties.

Alekperov added he had been in talks with the Ukrainian government in recent weeks about the political and economic issues related to Karpatneftekhim, and hoped for resolutions on both fronts in the near future.

Karpatneftekhim was forced to shut down petrochemicals production at the facility for two and a half months in May 2008, due to high feedstock costs. The company's management said at the time that it was more economically beneficial to continue paying employee salaries with production halted than to keep the plants onstream.

Based in Kalush, western Ukraine, Karpatneftekhim's capacities include 300,000 tonnes/year of PVC, 200,000 tonnes/year of caustic soda, 180,000 tonnes/year of chlorine and 100,000 tonnes/year of polyethylene.

Lukoil also announced on Thursday that its net income for the full-year 2012 had risen by 6.2% year on year to $11bn (€8.5bn), while earnings before interest, tax, debt and amortisation (EBITDA) rose by 1.7% to $18.9bn over the same period.

However, petrochemicals revenues for the year were down 29.8% to $1.4bn as a result of a fire at its Stavrolen petrochemical plant in December 2011, which led to some units at the plant being inactive until late September the following year. Domestic sales were down 55%, while international sales were down 8.2%.

Alekperov added that he did not expect the death of Venezuelan President Hugo Chavez to impact on the company's operations in the country.

($1 = €0.77)

By: Tom Brown
+44 208 652 3214

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