Bloomberg News

Lukoil Seeks Direct Sales to Germany After Supply Cut

August 30, 2007

OAO Lukoil, Russia's largest non- state oil producer, is seeking to sell directly to German customers to increase control over pricing after supplies were disrupted during the past two months.

``We hope commercial refiners will come to understand that our approach is objective and we don't need intermediaries,'' Chief Executive Officer Vagit Alekperov told reporters in Moscow today.

The company ``hopes'' to handle sales through its wholly owned trader Litasco ``in the near future,'' as it does in other countries, Alekperov said. ``I don't understand why German producers are content to use intermediaries.''

Lukoil will ship 600,000 tons a month (144,000 barrels a day) to Germany at a new price starting in September, company spokesman Vladimir Semakov said by telephone, without giving the price increase. Shipments in August will reach 520,000 tons, he said.

Lukoil reduced supplies through the Druzhba pipeline to Germany in July and August because shipments to the country were less profitable than to other destinations through Druzhba, the Baltic pipeline system and Black Sea ports, Alekperov said.

``The question is one of pricing,'' Alekperov said.

Two German refineries, Total Raffinerie Mitteldeutschland GmbH in Leuna and PCK Raffinerie GmbH in Schwedt, tapped fuel from alternative sources to supply their customers when shipments through Druzhba fell, spokesmen for the plants said by telephone last week.

To contact the reporter on this story: Torrey Clark in Moscow at tclark8@bloomberg.net.

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.


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