MOSCOW (ResourceInvestor.com) -- LUKoil is usurping Yukos' place as the poster boy for Russian oil and the country's hydrocarbon emissary abroad.
BP executives must still be kicking themselves for turning down LUKoil CEO Vagit Alekperov who approached them at the start of the 90s for help setting the company up. A former Minister of oil in Soviet times, Alekperov parleyed his government contacts into a privatization deal that spawned Russia's biggest oil company.
These contacts have come in handy again more recently.
The Kremlin is eager to develop Russia's oil industry, which forms part of its foreign policy arsenal. The period of liberal reform, which saw Yukos flourish, has come to an end as Putin begins to reassert Kremlin authority. In the new environment companies have to pay more attention to the government's wishes and LUKoil fits the mould.
However, LUKoil is not blind to the needs of the free market and has been to market to sell chunks in the company twice in the last few years, first on the London stock exchange and more recently the government sold its last stake in the company to the US oil major ConocoPhillips.
The company may have its ears open to the Kremlin, but last month the board of directors voted to open the company up and increase transparency. The main parameters for the company's development between 2005-2014 were agreed which includes a rapid expansion overseas, which will make LUKoil Russia's face in the international oil markets.
The company has ambitious plans for production and export. Production is supposed to rise 4% to 90.2m tonnes of oil in 2005, boost gas production by more than a fifth to 7.8bn cubic meters, and increase exports by 11% to 49m tonnes.
LUKoil has already been on a buying spree overseas and in the last quarter bought a Bulgarian refinery, established gas production in Uzbekistan, narrowly missed acquiring the largest petrochemical plant in Ukraine, set up a refinery in Romania and hopes to start work in Iraq with ConocoPhillips once the fighting dies down.
In the most recently deal the company reported this week that it had started $200m worth of exploration work with the Saudi Arabian state company Aramco. The joint venture is the first time a Russian company has been allowed to work in Saudi Arabia and LUKoil has signed a 40-year prospecting contract.
There is no way a Russian company can sign a deal like this without a little help from the government, but in the case of LUKoil's planned $1bn investment into Venezuela, it was the government that went out and got the job for them. The idea of a tie up was first floated last year and signed off after Venezuelan Vice President Jose Vicente Rangel visited Moscow at the end of the September.
Rangel will sit on a committee with his Russian counter part Deputy Prime Minister Alexander Zhukov which will assess a string of projects.
Significantly LUKoil is on the only company on the list of possible partners that does not belong to either state and includes Russian companies Gazprom, Zarubezhneft, Rosneft and Stroytransgaz who will team up with the Venezuelan state-run oil company PDVSA.