Building a Global Brand

Lukoil is the largest oil company in Russia, with more than 10 trillion barrels in proven reserves. And like Russia itself, the firm is gaining in global influence. Besides its operations in the former Soviet Union, it has oil and gas exploration projects in Central America and the Middle East. It also has gas stations in the United States and Europe, and it has plans to capture a bigger piece of Western markets. Lukoil vice president Leonid Fedun spoke with NEWSWEEK's Patrick Falby about the challenges of building a global oil company. Excerpts:

NEWSWEEK: Lukoil has come a long way since it was started 15 years ago.
Leonid Fedun: Our mission is to be in the top three or four international companies, so we need to double our hydrocarbon production and substantially improve our financial performance. We are making progress.

What are the biggest challenges reaching that goal?
Every year it's a new challenge. The main ones from last year were extremely high refining [costs] in Europe and, especially, the U.S., which prevented us from buying the refineries we were planning to buy. We were just not ready to pay this crazy price. Now the market is getting back to normal so we can come back to normal business purchases. One more challenge is [that] the amount of available reserves worldwide is shrinking. Today just 10 percent of international reserves are accessible.

What about competition with the state-owned company Rosneft—is that another challenge?
It's just one of our competitors. Yes, it's a big state-owned company, and we're a big private company, so we will compete. We have a number of advantages—for example, we have already made a lot of investments into new fields and new projects, and they're just getting into that.

For the last few years, Russia has been nationalizing strategic assets. How has Lukoil managed to maintain its private status?
Well, first of all, you should always keep good relations with governments everywhere. Even in Uzbekistan, even here in the United States. That's very important. And the rest derives from that.

So how does one keep good relations with the Russian government?
No. 1, you need to be a good taxpayer. You need to be a good corporate citizen, showing that you're ready to do projects for Russia, work on some social projects. For example, I'm in the soccer business myself.