Greece’s largest oil refining company Hellenic Petroleum is on the path to expansion, despite delays in finding a strategic investor. Negotations for the purchase of a 23 percent stake in the company by a consortium of Greek Latsis Group, owner of rival refiner Petrola, and Russian oil giant Lukoil have been dragging on since May this year. Latest reports suggest that new problems have arisen with the negotiations as the consortium now seeks management of Hellenic Petroleum and a 15 percent reduction in its original offer of 454 million euros.
In the meantime the oil refiner is pursuing expansion on its own regardless of the outcome of the privatisation talks. In October it took over the retail and inland fuel business in Cyrus of UK oil major BP. The acquisition gives Hellenic Petroleum a 35 percent share of the Cypriot retail market and a foothold into the regions. Following the acquisition, company executives hinted that Hellenic Petroleum planned to use BP Cyprus as a springboard into the Middle East, with initial plans for the company’s clients in Lebanon to be served through the Cyprus operation. Hellenic Petroleum already has upstream interests in the Middle East as part of a consortium with UK’s Sipetrol for concessions in Libya and Egypt, but the recent acquisition could see it develop a new retail market in the region.
The Cyprus deal followed one week after the acquisition of a majority stake in Montenegrin oil company Jugopetrol. Hellenic Petroleum outbid major international rivals Lukoil and Austria’s OMV with an offer of 65 million euros for a 54.35-percent stake. The Montenegrin company imports and distributes petroleum products and exports to Bosnia, Serbia and Kosovo.
The acquisition will enhance Hellenic Petroleum’s already substantial presence in the Balkans. The company’s flagship investment in the region its management of the OKTA oil refinery in FYROM. A 214-km pipeline capable of carrying 2.5 million tons of crude oil each year from Thessaloniki to the refinery in Skopje was opened in July this year. Along with the $110-million pipeline investment, Hellenic Petroleum is upgrading the OKTA refinery and constructing new pipelines to carry finished products from the refinery to Kosovo and South East Serbia.
The Greek refiner also owns a petroleum marketing company in Bulgaria and is on the verge of launching a similar venture in Yugoslavia. In Albania it owns a chain of petrol stations and, along with Austria’s OMV, it has concessions to explore and exploit hydrocarbons.
Within Greece, Hellenic Petroleum has teamed up with Belgium’s Tractebel and Greek construction company Aegek to build a 390 MW power generating plant in Thessaloniki, which is expected to be operational by 2004.
The success of the company’s aggressive expansion strategy is evident in its financial results. Despite low refinery margins, the group’s pretax profits jumped 43 percent in the first nine months of this year to 167.8 million euros from 117.3 million euros the previous year.
Workers’ unions opposed to the privatisation suggest that Hellenic Petroleum is capable of expanding on its own without a strategic partner. Analysts have also suggested that the company may stand more to gain from a public offering through the Athens stock exchange than by continuing with talks for a strategic investor. Although share prices remain low, the company’s recent acquisitions and improved financial results are predicted to have a positive effect on share prices in the year to come.
Sasha Dobra