Rompetrol prepares to boost refining by one quarter by 2012

Oil company Rompetrol is focusing investment on increasing its annual refining capacity by one quarter - to five million tonnes of raw material - by 2012, the group’s CEO Saduokhas Meraliyev tells Ana Maria Nitoi

May 2010 - From the Print Edition

Now one of the most significant foreign investors and employers in Romania, Kazakh state-owned KazMunaiGaz (KMG) acquired Rompetrol in 2007 to give the central Asian company a bridgehead in the European market.
The Kazakh owner’s main operations are exploration and production of crude oil and controlling Kazakhstan’s second largest oil producer, KazMunaiGaz Exploration Production, whose assets contained proven plus probable oil reserves of about 241 million tonnes at the end of 2008.
With a refining capacity of about 11 million tonnes of raw material per year, KazMunaiGaz added another four million tonnes per year with its ownership of Rompetrol’s main refinery Petromidia in Navodari, Constanta county.
This refinery, together with Rompetrol’s 800 petrol station network, were the main reasons for KazMunaiGaz’s purchase of The Rompetrol Group in 2007. The Kazakh company aims to increase production capacity of crude oil and boost oil processing and refining to an expanded customer base.
Rompetrol Group owns, through Rompetrol Rafinare, two refineries which include Petromidia and Vega in Ploiesti, Prahova county. The group intends to increase the refining capacity of Rompetrol Rafinare by 25 per cent - up to five million tonnes of raw material per year by 2012.
“This investment plan shows a lot of promise, considering that we see Romania as a great emerging market for petroleum products,” says Saduokhas Meraliyev, CEO of The Rompetrol Group.

Delisting ongoing

Now the group is preparing to delist Rompetrol Rafinare from the Bucharest Stock Exchange. Following the Mandatory Public Takeover Offer (MPTO) for the Rompetrol Rafinare shares last March, the group now owns 98.63 per cent of the company - more than necessary to take the refinery off the local bourse. In the last three months, the group purchased about 25 per cent of the shares of Rompetrol Rafinare, a company with a 1.48 billion Euro turnover and losses of 110 million Euro in 2009.
However the company’s Petromidia refinery has a historical debt to the Romanian state, which was converted into bonds in 2003. By the end of September, the group must decide the fate of these convertible bonds, which are evaluated at 570.3 million Euro. “KazMunaiGaz through Rompetrol Group has three options and is analysing each one of them - fully convert the bonds into shares at Rompetrol Rafinare, pay the 570.3 million Euro, or partially pay the debt and convert the rest in shares,” says Meraliyev. “This has to be looked at from every side.”

Petrol rise

Through its 40 subsidiaries in 12 countries and with large assets in Romania, France, Spain, the Republic of Moldova, Bulgaria, Ukraine and Georgia, The Rompetrol Group operates around 1,200 petrol stations. From this, about 800 units are located in Romania - an increase of more than 30 per cent compared to the beginning of 2008. Another 150 petrol stations, in France and north Spain, are managed by Rompetrol’s subsidiary, the Dyneff Group. An additional 55 filling stations are in Bulgaria, where Rompetrol has a 20 per cent market share of the petrol retail sector. The group also operates 51 gas stations in Georgia and another 19 in the Republic of Moldova.
In Romania, Rompetrol Downstream, the group’s retail division, owns 130 petrol stations, another 164 Partener Rompetrol units through its local dealers, 161 Rompetrol Expres filling stations, 160 internal bases and 181 Cuve stations. The last two represent an in-house concept for large companies, usually working in fields such as transportation, construction or agriculture, and to whom the option of driving to the nearest gas station is costly.
Last autumn Rompetrol launched the Litro filling station premium brand, with extra facilities and services, and now operates four Litro units in Romania on the A2 highway between Bucharest and Constanta. “We intend to keep Litro a separate brand and do not plan replacing the Rompetrol gas stations with Litro,” says Meraliyev.
Rompetrol Downstream last year invested about 14 million Euro in expanding its retail network in Romania by building 17 new gas stations. Last month the company opened a new filling station in the Republic of Moldova.
A main target of the company’s strategy is to expand its network in Romania and internationally. “An important part of the group’s operations this year is to develop our retail network through the construction of several high-quality gas stations in Romania, the Republic of Moldova, Georgia and Bulgaria,” says Meraliyev.
Among Rompetrol’s latest projects are the launch of the Efix fuel in Bulgaria, which aims at protecting the car’s engine and which is present in Romania and the Republic of Moldova.
Rompetrol sells in Romania about 1.4 million tonnes of fuel per year - about 20 per cent of the total market, which is estimated at about six million tonnes annually.
Saduokhas Meraliyev says that Rompetrol has invested 1.18 billion Euro between 2008 and 2009. “The Rompetrol Group is one of the top foreign contributors in the Romanian economy and this situation will not change in the current year,” he adds. “We had and still have development plans for all the core businesses in the group - refining and petrochemicals, retail and trading.”
Thus the group’s estimated investment for 2010 amounts to 176.7 million Euro. This includes the 13.25 million Euro to be poured into Rompetrol Petrochemicals, the only producer of polypropylene in Romania, to increase the capacity of the high density polyethylene installation (HDPE) by more than 70 per cent by March 2011.
While continuing to focus on its core business of refining oil, trading raw materials from petrol and distributing fuels throughout its retail network, Rompetrol is still analysing opportunities for its non-core operations, including exploration and production, distribution, industrial services, industrial ecology services, safety and protection services. “It is too early to say if or when any Rompetrol subsidiaries will undergo major changes,” says the CEO.
The financial crisis witnessed a drop in energy consumption in Romania and worldwide. Rompetrol reduced its refining capacity to four million tonnes of raw material last year from 2008’s 4.5 million tonnes. “Nevertheless Rompetrol has still maintained a good margin, considering the global and national financial situation and the drawbacks in the oil and gas industry,” says Meraliyev.
Rompetrol exported a similar quantity of oil in 2009 as in the previous year - about 1.84 million tonnes of end products including petrol, diesel fuel, coke, polyethylene - despite the decrease in refining margins and demand for oil products, triggered by the closing down of refining units in Europe. While export volumes have remained constant, the value has decreased from 1.176 billion Euro in 2008 (when the price per oil barrel dropped to 22 Euro) to 0.735 billion Euro in 2009 (when the price reached an average of 59 Euro per oil barrel).
Last year the group posted a 5.16 billion Euro turnover, down from 2008’s 6.42 billion Euro. However, at the same time, the Rompetrol Group has increased its number of employees by five per cent between December 2007 and December 2009 to 9,600.

Who is Saduokhas Meraliyev?

Before being appointed CEO of Rompetrol in July last year, Saduokhas Atashovich Meraliyev, 51, worked as the group’s deputy general manager since 2008.
Previously, he spent six years as general manager and executive manager at the National Company KazMunaiGaz and also worked as field manager at Tengizchevroil - a joint venture between Chevron, ExxonMobil, KazMunaiGaz and LukArco, which operates the world’s deepest (3.6 km) operating super-giant oil field Tengiz.
In 1997, he was appointed general manager of Chevron MunaiGaz joint venture and, one year before, led the operations of Pavlodar refinery - which is Kazakhstan’s largest in refining capacity of oil barrels per day.
Saduokhas Meraliyev also gained experience working for the Kazakh authorities as director for the Production Department in the Oil and Gas Ministry between 1994 and 1996.
The CEO graduated from Moscow’s Gubkin University of Oil and Gas in 1981 and from the Moscow Institute of Economics and Finance in 1992.

Takeover steps

Kazakh-state owned oil and gas integrated company KazMunaiGaz has become one of the most significant foreign investors in Romania after acquiring in mid-2007 a 75 per cent stake in oil company The Rompetrol Group from Romanian businessman Dinu Patriciu, who controlled 80 per cent of the firm. and Philip Stephenson, who owned 20 per cent. The deal cost KMG about 1.6 billion USD in mid-2007. Two years later the Kazakh company purchased the remaining 25 per cent stake from Patriciu and Stephenson for an undisclosed amount.