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Lukoil Begins Effort to Build Ties Globally

NEW YORK -- Fresh from a new alliance with ConocoPhillips, Vagit Y. Alekperov, the president of Lukoil, is trying to transform his company from a Russian oil company to an international oil giant, and is encountering the vagaries of global markets and geopolitics along the way, reported the New York Times.

ConocoPhillips bought the Russian government's 7.6 percent stake in Lukoil for almost $2 billion, putting itself in a position to share in Lukoil's substantial reserves by entering into a joint venture for production in undeveloped hydrocarbon fields in northern Russia. At present, Lukoil's reserves of 20 billion barrels are two and a half times those of ConocoPhillips, yet the American company has more than twice the market capitalization of its new Russian partner. Lukoil's shares trade in London.

Alekperov attributed the gap to "the political risks and instability" in Russia. He said he hoped that ConocoPhillips' "profound analysis of our corporate governance system" and reserves would strengthen Lukoil's credibility, despite continuing concerns about the Kremlin's influence over the Russian oil industry.

Although ConocoPhillips bought out the Russian government's stake in Lukoil, he said that given the importance of energy to Moscow, oil companies "will always be a focus of attention on the part of the government."

"I would not have ventured into this alliance without the blessings of President Putin," the Lukoil executive said, adding that he did not think that James J. Mulva, the CEO and president of ConocoPhillips, would have formed the alliance either "without the blessing of his administration."

In other oil news, BP plc, the world's second-largest publicly traded oil company, announced that profits rose in the third quarter because of record crude prices and an 11 percent increase in production.

Oil and gas output averaged 3.88 million barrels a day, with a gain in Russia in part offset by storms in the Gulf of Mexico that led to rig shutdowns, London-based BP said in a statement. The company reported results for the quarter on Oct. 26. Crude oil in the United States in the period averaged $43.88 a barrel, 45 percent more than a year ago.

BP, Exxon Mobil Corp. and other oil companies are benefiting from rising oil prices, which reached $50 in New York for the first time on Sept. 28 as violence in Nigeria and hurricanes in the Gulf of Mexico lowered supply. BP is expanding because of a $6.35 billion venture in Russia.
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