Russian oil firms fight traders for export market

[Reuter / Lynnley Browning]

MOSCOW, Jan 28 (Reuter) - Russia's new oil majors want to
wrest crude oil exports market away from traders in a battle for
control over one of the country's most lucrative businesses.
Domestic oil producers, who export about one third of their
total output of 5.86 million barrels per day, are fighting for
control over a chunk of these exports known as the federal
programmes market.
``Producers are trying to oust the trading companies from the
business of implementing these programmes,'' said a senior source
at Alfa-Eko, one of Russia's biggest oil exporters with no oil
production facilities. ``It would mean that we have no job.''
Under so-called federal programmes, the government signs
decrees every year authorising companies to export certain
amounts of crude oil to finance state investment programmes.
The amounts are getting bigger, making federal programmes a
huge business for companies which see dancing dollar signs in
strong world oil prices.
About 20 decrees call for federal programme oil exports to
soar to 60-70 million tonnes in 1997 -- representing 60-70
percent of Russia's total oil exports.
The programmes are used by the Kremlin to finance everything
from space shuttle lift-offs from the Baikonur cosmodrome to
building baby-food factories.
Federal programme exporters -- most of them trading firms
rather than producers -- keep some of the proceeds, getting rich
on the difference between domestic and world oil prices.
Traders say that if they are squeezed out of this lucrative
niche, they could be put out of business.
Fuel and Energy Minister Pyotr Rodionov told Russian oil
executives in Siberia last week that the government was
preparing to limit the number of companies exporting oil.
The president of Russia's largest oil company LUKoil, Vagit
Alekperov, was quoted by Interfax news agency as saying
producers, not traders, should deliver oil abroad.
``I guess they just don't like all of the MESs and Alfa-Ekos
of the world making such huge margins,'' said the head of a small
European trader, referring to two of Russia's most prominent
independent oil exporters who thrive on federal programmes.
Russian crude oil prices were 70 percent of world prices
before international markets began their rally.
Benchmark Brent blend crude oil has been near six-year highs
for weeks and, at an average $20.30 a barrel during 1996, was up
20 percent last year from 1995.
With that in mind, Russia's new vertically-integrated oil
majors wrote to Prime Minister Viktor Chernomyrdin last month
pleading that they, not traders, be allowed to carry out the
federal programmes and asking for more commercial exports.
Federal programme exports in 1996 -- originally targeted by
the government at 71 million tonnes, were eventually scaled back
to 27.5 million tonnes. Domestic oil producers did less than 20
percent of that volume, or around 5.3 million tonnes.
Even powerhouse Alfa-Eko had to fight for export pipeline
space for its 1996 allotment of four million tonnes.
``We couldn't fulfil our allocation because there was no
pipeline space -- we couldn't get it,'' said the Alfa-Eko source,
adding that the firm eventually shipped only 1.1 million tonnes.
Russia's 13 crude oil producers -- most of them vertically
integrated firms with their own trading arms -- already have a
head start on traders in that the biggest of them ``coordinate''
oil exports and have the power to allot precious pipeline space.
This year's programmes will probably be trimmed, but they
will still be a big cash earner for whoever gets the business.
``There's probably a desire in the Fuel and Energy Ministry
to squeeze out the traders,'' said a Nafta-Moskva source. ``After
all, we're not part of their organisation anymore.''