OREANDA-NEWS. April 13, 2010. TNK-BP’s Executive Director German Khan came to Ukraine last week to build a relationship with the new government. He spoke to Kommersant’s special correspondent Oleg Gavrish about what Prime Minister Nikolay Azarov promised and about TNK-BP’s plans to develop the Black Sea shelf and enter the gas market, reported the press-centre of TNK-BP.

— What were the results of your talks with Prime Minister Nikolay Azarov?
The meeting with Mr. Azarov and first Deputy Prime Minister Andrey Klyuev was held at our initiative. We looked back at what our company has achieved over ten years in the Ukrainian market and spoke about the investments we have made. They said they supported all our investment proposals and are ready for constructive cooperation. This is a clear sign that the investment climate in Ukraine is improving. We also discussed a number of opportunities and additional types of business that we would like to develop. These include unconventional gas and development of the Black Sea shelf. These projects are still in the conceptual and study phases, but in the near future we’ll formulate our proposals more distinctly and begin a detailed dialogue.

— Did you talk about the latest conflict between the oil traders and the Ministry of Fuel and Energy over the abrupt rise in prices at the petrol pumps?
That issue was discussed in the broader context of managing the process of price changes. We’re very clear on why prices jump around on the Ukrainian fuels market, because we’re a player in that market. It’s because of the volatility of world oil prices, the Ukrainian market’s extreme dependence on fuel imports and the monopoly enjoyed by certain traders who are able to influence prices in a number of regions. All this creates some uncertainty and, as a consequence, nervousness.

— Did the Prime Minister promise not to regulate the market in hands-on mode?
Mr. Azarov emphasized that any investment that is carried out transparently would be supported, welcomed and protected. And that’s actually what we need.

— You’ve previously stated that you intend to invest around USD400 million in the Lisichansk Refinery over 5—10 years. Have TNK-BP’s plans for this company changed?
We’ve decided to invest USD 500 million over the next three years. This money will be used to increase the refining yield and improve output quality up to Euro-4 level.

— So that means there will be no more talk about shutting down your Ukrainian business?
We think that despite all commercial complications the prospects for business in Ukraine are good. Ukraine is a large European country and an interesting market that we’ve been present in for ten years now. We’ve achieved some results and can see potential growth opportunities.

— What’s TNK-BP’s interest on the Black Sea shelf?
All I can say for the moment is that we’re attracted by new projects rather than existing ones.

— So you’re talking about entering the Ukrainian gas market?
Basically, yes.

— The UTN-Vostok service station network is in a legal dispute with the Privat group. What’s your view of this?
When we were preparing to purchase the UTN-Vostok network we studied the Privat group’s claims and believe that the issue can be resolved out of court. If we have the opportunity to settle it outside the courts we’re willing to do this.

— So you’re prepared for negotiations with the Privat group?
Yes, as soon as we close the deal.

— Is it true that you’ve also bought the KLO, Gefest and Kalina service station networks?
Apart from the UTN-Vostok network we’ve bought nothing yet. But we’re working on expanding our retail market presence and negotiations are underway.

— With the companies I listed?
I can’t comment on that.

— Is it part of TNK-BP’s plans to become the operator of the Odessa – Brody oil pipeline again?
No. Like the other Russian companies we would like to see this route working more stably. The loan that we provided in the form of line-fill oil has been repaid and we have no further need for operatorship. Transneft and Ukrtransnafta are perfectly capable of supplying oil along this route.

— Once the assets of the Kremenchug Refinery are returned to the state the Ministry of Fuel and Energy is promising to find a new investor for that plant. Could this be of interest to you?
No. We’re not planning to buy any more oil refining capacity in Ukraine.

Interviewed by Oleg Gavrish

Personal Dossier — German Khan

Born in Kiev, 1961. In 1988, graduated from the Moscow Institute of Steel and Alloys. One of the founders of the Alfa Group consortium – one of the largest private financial—industrial corporations in Russia. From 1992 to 1998 held various management positions in Alfa group. In addition, was Director of the Commodities Department of LLC Alfa-Eko from 1995 to 1998. From 2000 to 2003 was Deputy Chairman of the Management Board of LLC TNK. Has been Executive Director of TNK-BP since its creation in 2003. Member of the Supervisory Council of Alfa Group and the Boards of Directors of OJSC NGK Slavneft, Alfa Finance Holdings S.A. (oil and financial assets) and ABH Holdings Corp. (Alfa Bank group holding company).