[Marxism] Dividing up the pie

[Louis Proyect <lnp3@xxxxxxxxx>]

NY Times, October 2, 2004
Lukoil Begins Effort to Build Ties Globally
By JEFF GERTH

Yagit Y. Alekperov, the president of Lukoil, is at ease talking about
finding fossil fuels. "I am an expert in the area of oil and gas
production," he said in an interview in a New York hotel on Thursday.
"There's nothing else that I know how to do."

Fresh from a newly announced alliance with ConocoPhillips, Mr. Alekperov
is trying to transform Lukoil from a Russian oil company to an
international oil giant. Along the way, he is encountering the vagaries
of global markets and geopolitics.

ConocoPhillips bought the Russian government's 7.6 percent stake in
Lukoil for almost $2 billion, putting itself in a position to share in
Lukoil's substantial reserves by entering into a joint venture for
production in undeveloped hydrocarbon fields in northern Russia.

At present, Lukoil's reserves of 20 billion barrels are two and a half
times those of ConocoPhillips, yet the American company has more than
twice the market capitalization of its new Russian partner. Lukoil's
shares trade in London.

Mr. Alekperov attributed the gap to "the political risks and
instability" in Russia. He said he hoped that ConocoPhillips's "profound
analysis of our corporate governance system" and reserves would
strengthen Lukoil's credibility, despite continuing concerns about the
Kremlin's influence over the Russian oil industry.

Although ConocoPhillips bought out the Russian government's stake in
Lukoil, he said that given the importance of energy to Moscow, oil
companies "will always be a focus of attention on the part of the
government."

"I would not have ventured into this alliance without the blessings of
President Putin," the Lukoil executive said, adding that he did not
think that James J. Mulva, the chief executive and president of
ConocoPhillips, would have formed the alliance either "without the
blessing of his administration."

(clip)

The other potential production alliance between the companies, the West
Qurna field in Iraq, would have strong political overtones. Lukoil was
originally granted the concession in 1997 under Saddam Hussein, at a
time when relations between Moscow and Baghdad were cordial. But the war
in Iraq called into question the validity of that concession, and Lukoil
has so far been unsuccessful, in Washington and in Baghdad, in obtaining
final confirmation of its claim.

The political situation in Iraq is "very complex so far," Mr. Alekperov
said, so bringing in ConocoPhillips was a move at "risk sharing" with
the hope that an American company would improve Lukoil's prospects with
a new Iraqi government.

If a West Qurna deal is completed, ConocoPhillips will own 17.5 percent,
Lukoil's share will be 51 percent and the rest will be divided between
the Iraqi government and other Russian companies.

Lukoil projects that West Qurna could produce 500,000 barrels of a day
in a few years after significant investment. Mr. Alekperov said that
based on extensive studies, "we are intimately familiar with the
details" of West Qurna, and "there are really no unknowns with that
field," even after years of neglect.

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