Building a Global Brand

Lukoil pays high taxes—the Russian government takes nearly all profits from prices that exceed $27 per barrel of oil. Do you lobby the Russian government on this issue?
Do you know anyone who wouldn't like to pay lower taxes? We're paying the same taxes as Rosneft and Gazprom, so no problem here. These taxes also still let us show profits. When you've got profitability of more than 20 percent, it's not a good idea to ask for lower taxes. That's the first half of the truth. The other half is that production in Russia is stagnating. New projects require huge investments. In 2005 dollars, Russian needs about $3 trillion to maintain and [expand] production. So of course when other state-owned companies go for big projects, they'll be talking about tax incentives. These discussions have been going on for some time now, and they'll become especially relevant around 2009 or 2010. But we're willing to work even under the current tax conditions.

The Russian government is supporting your bid to be the first to develop an oil field in Iraq after the fall of Saddam Hussein. What will need to happen for Lukoil to develop that field?
The main problem in Iraq is they still don't have national petroleum legislation. We just need to understand who we need to talk to—who has the mandate. When this legislation is passed we'll have a clear picture of where we have to go. But the first thing we want to state is we have all the legal rights for this field—all the leading U.S. law firms confirm that all of our rights are legal. We have enough expertise and technology to make this field operational faster than the others because it was Soviet geologists who worked on this field in the past, and we have all the necessary data. We are also ready to work under any political circumstances. We're counting on support from the U.S. State Department, because ConocoPhillips is going for this field together with us.

Have you had any assurances from the State Department that you'll have their support?
The problem is that the U.S. doesn't have much influence in Iraq at this point.

How is your brand doing in the United States? A couple of years ago, Lukoil made a big push to market its brand here—has that strategy worked?
We have about 2,000 gas stations working, and we're happy to have a chance to supply good fuel [in the United States]. We're not hiding the fact that we had a plan to buy a refinery here in the U.S., but the situation was not favorable. We expect the U.S. economy to be revitalized once the dollar devaluation is over. We had this situation in Russia: once the dollar has been devaluated, the assets will be cheaper and we'll be able to start working and after that the U.S. economy will be on the rise.

How long do you expect you'll have to wait for this devaluation?
I personally think that over the next two years the dollar will go down substantially. It's not up to the U.S.—it's up to China, to Saudi Arabia. If, for example, OPEC decides to use a multicurrency basket, this will weaken the dollar. And today all crude supplies are making losses because supplies are linked to the dollar and the dollar's going down. Crude oil exporters, they also have some limitations if they want to buy something abroad. For example: Dubai. They tried to buy a port in the U.S. and they weren't allowed to do that. So why should you have the dollar if you can't use it?

© 2007