ROMPETROL PLANS $200 MILLION INVESTMENT IN THE BLACK SEA REGION

Rompetrol Group NV, Romania’s second  biggest oil company, plans to invest about $200 million in the country as it seeks to expand its retail network around the Black Sea region by at least 50 percent.

The Amsterdam-based company, which is wholly owned by KazMunaiGaz National Co, seeks to add about 150 new stations in Romania and another 200 stations in Bulgaria, Georgia and Moldova to accommodate rising output at its Petromidia refinery on the Black Sea coast, Senior Vice President Azamat Zhangulov said in an interview in Bucharest, as cited by Bloomberg. Turkey and Ukraine are managed as standalone projects, he said.

"We have started the project of retail network expansion in the Black Sea region and the value is quite big, we are talking about hundreds of millions of dollars," Zhangulov said. "The plan is for a term of three to five years, but we want to do them as fast as we can and we feel it is the right moment to do it."

Rompetrol has invested about $1.3 billion over the past 10 years to increase the annual capacity of its Petromidia (RRC) refinery on the Romanian Black Sea coast to 5 million tons and is now seeking markets to sell their surplus of about 1 million tons of fuel a year from the growing output.

The company also plans to have at least 100 stations in Ukraine and enter the Turkish market by buying some stations and building new ones, according to Zhangulov. Rompetrol has "an ambitious target" to invest about $1 billion in Ukraine in the next five years, depending on market conditions and the "overall investment climate," he said.

Risks and Appetite

"There are lots of opportunities in Ukraine, but where there are opportunities there are also risks and we will go as far as we’ll have an appetite to go," Zhangulov said. "We want to achieve as first stage a significant network in Ukraine of at least 100 stations, maybe more, and to go forward with that. The investment plan will depend on what we achieve."

Rompetrol will also invest about $100 million in its Romanian refinery this year as it struggles to make it profitable, according to Zhangulov.

The company estimates its gross total sales this year at about $12.4 billion and earnings before interest and taxes, depreciation and amortization at $195 million.

Rompetrol’s shareholders are currently considering a $100 million investment in a 75-megawatt gas-fired power plant to secure the energy consumption of the Petromidia refinery and boost its efficiency, Zhangulov said.

Kazakhstan’s state-owned oil and gas company bought 75 percent of Rompetrol Group, which was valued at $2.7 billion, in August 2007 and doubled its refining capacity. In 2009, it bought the remaining 25 percent from the previous owner, Dinu Patriciu, one of Romania’s richest men, according to Forbes.

Legal Disputes

The company entered several legal disputes with the Romanian government in the past years over an alleged unpaid debt of about 570 million euros ($773.6 million) to the state.

Rompetrol gave the Romanian state a minority stake of 44.7 percent in the Petromidia refinery in 2010, after converting a portion of the debt in shares. The state is challenging the swap, saying Rompetrol still owes it the full amount in cash or a full conversion of the bonds, which would give it the majority stake in the refinery.

The government has filed lawsuits against Rompetrol Group, saying it misinterpreted the bond agreement, which stated that Rompetrol had the option to either pay the debt in full or convert all the bonds into shares.

"We are trying to buy back the shares and that is a matter of price," Zhangulov said. "Now is the best time to get to a solution because everything is stable in the Romanian government. It’s clearer that our investment plan can move forward and we hope that we can reach an agreement with the government and we will take all the necessary steps in order to reach it as soon as possible.