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Russia: Yukos Says National Oil Output To Surpass Saudi Arabia's By 2009

Simon G. Kukes is the chief executive officer of Yukos, Russia's biggest oil company. Kukes was in New York this week to address a panel of the influential policy institute, the Council on Foreign Relations. Kukes talked about Russia's rising importance as a global energy producer. He also touched on the ongoing controversy surrounding Yukos founder and former chairman Mikhail Khodorkovskii.

New York, 10 February 2004 (RFE/RL) -- Russia will overtake Saudi Arabia this decade as the world's biggest national oil producer.

That's a prediction by Simon G. Kukes, the Russian-born, U.S. chief executive of Yukos, Russia's largest oil company.

Kukes told the New York-based policy institute, the Council on Foreign Relations, on 9 February that Russia's charted oil reserves will increase by at least 30 percent by 2009. As a result, he says, Russia will become the world largest crude oil producer.

"I see Russia [becoming the] number one producer of crude [oil] -- if you take gas and oil it is number one [already] -- by 2009. I think by that time they will bypass Saudi [Arabia]," Kukes said.

Kukes was optimistic about the future of the oil industry in general. He told the council in his view it is unlikely that oil will fall below $25 a barrel in the foreseeable future. The price now is around $33 a barrel.

Kukes, however, avoided questions concerning the fate of Yukos founder and former chairman Mikhail Khodorkovskii. Khodorkovskii was arrested last year on charges of fraud and tax evasion. The arrest drew widespread criticism from some who felt it was politically motivated.

Russian tax authorities have accused Yukos of owing some $3.4 billion in back taxes. Asked repeatedly on the issue, Kukes was cautious.

"Khodorkovskii made a great contribution to the company. Now he has got some legal problems with the government. The case is in court. It's not fair for me to comment on this," Kukes said. "We had a discussion with him five to six months ago and he said: 'Politics is not your area. You will be hired as a [Yukos] world man.' So I try to stay that way. It will not do any good, neither to the company nor to him, to make any comments. And to tell you the truth -- you know as much as I do."

Kukes said he didn't believe that Yukos was facing any new problems with the government and that a dialogue is going on.

"I [don't] see any new charges coming for the company. In any request it is underlined what they [the government] were originally doing. So I didn't see [a] lack of desire to talk to us, we're talking about discussing taxes, comparing notes [of] what they think we underpaid. We don't think so. So we set up some kind of team to look at that. So we have a dialogue and they drew the line and we are trying to draw the line between shareholders, current shareholders, and the company. My objective is to preserve the company," Kukes said.

The Yukos affair has frightened foreign investors, who see a potentially heavier hand by the government in private industry.

Kukes said in spite of Yukos's difficulties, he believes Moscow is legitimately interested in attracting long-term foreign investors. He said, "Russia will not go overboard."
"I see Russia [becoming the] number one producer of crude [oil] -- if you take gas and oil it is number one [already] -- by 2009. I think by that time they will bypass Saudi [Arabia]."

Kukes also emphasized the fact that Yukos is the only large oil company in Russia run by independent management. He says such a system is more efficient since it diminishes the risk of a possible conflict of interest.

Investors can buy and sell shares of Yukos in the United States on a relatively informal "over the counter" market. Yukos shares are not traded on major exchanges like the New York Stock Exchange or the NASDAQ exchange.

Kukes was also asked if Yukos is interested in participating in the construction of a pipeline to transport oil to Russia's ice-free Arctic port of Murmansk, from where it could be shipped to Europe and the United States. His answer was "no," explaining that Yukos is not in the business of running pipelines.

"First of all, we are not in the business of running pipelines and we're not an operator of pipelines. We [have] got [the Russian state monopoly] Transneft, which has one of the lowest tariffs in the world, operating very nicely. [They] keep increasing export capacity through drag-reducing agents, putting in new pumps. So I would say, we can participate in some kind of finance, but I think the ownership [should] be operated by Transneft," Kukes said.