LUKoil Expects 2010 H1 Asian Oil Products to Expand

SINGAPORE — LUKoil Asia-Pacific will expand its trading business in southeast Asia, especially in naphtha and fuel oil, by the first half of 2010, said Litasco CEO Gati al-Jebouri on Wednesday.

This is to position itself for sustained demand growth in Asia, which the firm is increasingly turning to for its exports, because the impact of the recession on the sector has not been very severe even as it looks towards recovery in 2010, he said.

"We are looking to grow our business across the board in Asia, Singapore in particular," he said, adding that LUKoil has its strength in fuel oil and naphtha in this region.

Litasco is the trading arm of Russian oil major LUKoil.

LUKoil's refineries have a throughput of 2.2 million barrels per day and exported about 6 million tonnes of fuel oil into Asia last year. Figures for 2009 were not immediately available.

The company, which has just started exporting naphtha this year, has so far shipped out 120,000 tonnes of the petrochemical feedstocks to Asia since since January.

Although this makes up less than 5 percent of an estimated 3.2 million tonnes of naphtha that has streamed into Asia from the West since January this year, it is still a breakthrough for LUKoil, traders said.

"We believe there are opportunities [to move cargoes into Asia], especially with the low freight rates at the moment," al-Jebouri told reporters on the sidelines of the Asia Pacific Petroleum Conference (APPEC).

LUKoil, the country's No. 2 oil producer with a net income of $9.1 billion in 2008, has seen the resignations of four senior traders in recent months, though its business has not been affected and al-Jebouri expect further expansions.

"We had seen some changes in our [Asian] trading team over the past six months," he said.

"And with respect to growing the business, watch this space, there will be some interesting news within the next six months," he told Reuters.

The company lost its veteran naphtha trader, Shinya Hasebe, who moved to Itochu Corp. to take on a role as general manager for middle office, focusing on risk management.

"I am very disappointed. He is a true asset for LUKoil," said al-Jebouri.

Hasebe has been replaced by two traders, Rob Kreider and Marc Cheong, industry sources said.

It also recently saw its fuel oil trading team reduced to one from three after Matthew Lim and Ong Eng Hian left.

But Chan Joo Peng, who had been in operations at LUKoil, was promoted to the post of trader, to work alongside current trader Chow Tee Lee, sources said.

Kelvin Zheng, who was previously focusing only in risk management, has now been roped in to also manage middle distillates trading.

Al-Jebouri said the impact of the downturn on the oil industry has been milder than expected.

"[But] we are not out of the woods yet. We have to wait and see how things will pan out in the next three to four months," he said adding that he expects global crude benchmarks to average at $60 to $70 a barrel this year.

He said governments in consuming countries could start to pull back their stimulus packages next year as they emerge from the downturn, but he still expects demand to grow for Asia's oil products.

"My personal view is that demand in Europe will go down marginally next year," he said.

"In Asia, the question is how much will demand increase. On a severe downturn, I would expect to see around 2 percent growth. If we were to continue on moderate downturn, growth will likely be around 4 to 5 percent," he said adding that he personally thinks that growth will be about 2 percent.