Russia's Lukoil dents firm crisis

Russia's Lukoil dents firm crisis

By Brian Killen

LANGEPAS, Russia (Reuter): Russia's biggest oil conglomerate, Lukoil, is reducing debts between its subsidiaries but some workers in this Siberian outpost have not received salaries for two months.

The Lukoil Financial Company, set up last year to tackle the non-payments crisis, started work this summer. It has reduced salary delays but not eliminated them, Lukoil vice-president Leonid Fedun told reporters.

The entire Russian economy is burdened by a chain of debt that has forced many oil companies to curtail output and put workers on compulsory leave.

"(Lukoil's) non-payments began to grow in the middle of last year and this continued until this summer," Fedun said.

At the peak of the crisis, Lukoil was owed 2.4 trillion rubles ($730 million), while the company's debt to others was 1.3 trillion rubles ($390 million).

The Lukoil Financial Company, which controls payments among the conglomerate's producers, refineries and marketing units, has had some success, Fedun said.

"Debts (to Lukoil enterprises) have been reduced to 1.8 trillion rubles ($545 million) and our debt to the budget is one trillion rubles ($300 million)," he said.

Russian oil companies are often obliged to supply fuel to other key sectors of the economy such as agriculture, metallurgy and power stations, but payment is not always guaranteed. Tax non-payments and subsequent fines make the situation worse.

In Langepas, home to Lukoil's Langepasneftegaz production unit, officials said there had been some improvement, but they appeared frustrated by persistent cash flow problems.

Chief Engineer Vladimir Zazirny said he was "not overjoyed" by the results of the Lukoil Financial Company. "I don't see the money from the petrol pumps coming back to those who produce the oil," he said.

"Non-payments make it impossible to carry out technical work. There are not enough resources to pay for equipment, to pay for transport or to pay salaries on time. We have to spend hard currency from oil sales to pay salaries," he said.

Langepasneftegaz, which expects to produce about 15 million tons of crude oil in 1994, has cut its workforce to 17,000 from 19,000 in the past year.

But the company, one of Lukoil's three main crude oil production enterprises in the heart of western Siberia, is better off than most.

A group of drilling workers in the region, about 2,500 km (1,500 miles) east of Moscow, had no regrets about spending two uncomfortable weeks of each month in the swampy taiga, transformed into a frozen wilderness in winter.

Temperatures fall as low as minus 50 Celsius (minus 58 Fahrenheit) and many workers wear fur hats beneath their orange hard hats.

"It's better now with the salaries than it used to be," said one of the workers in oil-stained overalls.

Alexander Buchin, who had been working in the same region for 14 years, said the average monthly salary was about one million rubles ($300) -- three or four times more than in "the mainland" west of the Urals Mountains.

"There are long delays and when we finally receive our salaries, their value has been reduced by inflation," he said. "But it's better here than in Samara (central Russia)," another worker said.

Fedun said Lukoil was trying to reduce the indebtedness further, perhaps by issuing securities. But he could give no details of this. Salary delays could be cut to 12-15 days, he said.

Lukoil, which produced about 50 million tons of crude oil last year, has started selling shares for cash. It plans to offer 15 percent of stock to foreign investors next year.

Zazirny said funds from share sales could be used to buy new equipment for Langepasneftegaz. "It will probably be good for us if our shares are sold in New York or London," he said.

Lukoil board member Semyon Vainshtok, head of the main Kogalymneftegaz production unit, hoped that a planned $700 million credit from Japan's Mitsui & Co would help make up for the cash shortages.