SOCAR Ukraine: Business strategy in Ukraine is determined by highest business and ethical standards of parent structure - INTERVIEW

Kyiv. 26 December. REPORT.AZ/ SOCAR Group of Companies is not only main part among public companies in Azerbaijan, but also an influential member in the oil and gas market of Ukraine.

Report News Agency presents interview with SOCAR Group of Companies Director for Wholesale Trade Andrei Bychkov and Director for Retail Trade Igor Orlov on partnership plans of SOCAR Ukraine with state-owned enterprises for the year of 2017, adaptation of development strategies and priority areas of its activity.

- SOCAR has launched first filling chain in Ukraine in 2011 and gained customers with faultless provision of services and high-tech facilities. Since then, the company increased number of its filling station chains to 58 across the country. Rate of development has slowed down recently, at the least, new chains are not opened as often as initially. How do you assess your activity in the past 5 years? What is change in the development plan of filling station chain?

Igor Orlov: You have quite rightly emphasized that we achieved to gain customers. This is our main success. We have created resonance since the first day of our activity in Ukraine, amazed our clients and defined new standards of service. Of course, at starting, development was more intense, we have tried to be available in all regions. Currently, organic growth requires to be focused on operating efficiency, which includes analysis of the existing processes, cost structure, portfolio in order to take maximum benefit from the already launched chain as well as careful selection of new areas. Surely, both domestic and foreign economic situation also had a certain role. However, SOCAR almost the only company in Ukraine, which continues to open new filling station chain.

Andrei Bychkov: Actually, we have moved from quantity into quality in the field of retail trade. As for wholesale trade, we are operating more intense by increasing the group's turnover rate during the year. Customer base includes more than 2000 contractors, which carry out small and large fuel purchase. It consists of both state-owned companies and private sector. As in retail trade, faultless provision of services is a distinctive feature of our proposal. Disciplined fulfilling obligations and acting in the framework of the law without exception, we have won reputation of a responsible and reliable partner, which helps us to develop this aspect of the business.

- Could you give detailed information about development plans. Which segments are the priority areas for wholesale trade?

Andrei Bychkov: Certainly, a public sector, in which we have achieved a lot. Over the last year we have done serious work, including related to the increase in procurement transparency. For example, we have set a precedent in the "Ukrzaliznytsia" OJSC, where a new player entered the public procurement system, ensuring victory due to the competitive offers We will continue to be a catalyst for such changes. We will try to ensure equal conditions for market participants and state officials in the open field and dialogue.

We have also great potential in cooperation in the field of agriculture. Ukrainian agrarians are one of the large-scale consumers of fuel, interested in a partnership that provide high quality products at fair prices. The regions, which are famous for its products and agroholdings, such as Ternopol, Ivano-Frankivsk, Vinnytsia, are priorities for us. We plan to launch 3 oil tanks to ensure smooth logistics in regions.

- How do you assess reforming the system of public procurement to make them more competitive and transparent?

Andrei Bychkov: There are not too much mechanisms, only two versions available. The first is open dialogue with oil traders, reliable companies as well as to make necessary changes in the conditions of bids to ensure their transparency and eliminate manipulating possibilities. The second is to establish strategic fuel reserve in the "Ukrzaliznytsia" to prevent trader's pressure on "Ukrzaliznytsia" OJSC against the background of periodic deficit.

- Mr. Orlov, what are plans of the company in retail trade? Does SOCAR plan to open new filling stations in the near future and in which regions?

Igor Orlov: I have stated that focus of attention in 2017 will be improving efficiency and maximum benefit from each filling station. At the same time, we plan to develop the chain in the cities with a million-plus population such as Kyiv, Kharkov, Dnepr, Lvov.

- We received information that a new filling station will be opened in Kyiv in the near future. Please, give further information.

Igor Orlov: Yes, that's right. A new station will be opened this month on the street Protasov Yar, in the immediate vicinity of the well-known by Kyivans, ski trail. Therefore, in addition to traditional services as oil and gas, SOCAR intends to offer something special for our skiers (smiles). Maybe a ski stop or something special for the adventurers. Come to the opening and see it!

- It sounds interesting. By the way, speaking of services. How do you generate ideas for new services?

Igor Orlov: You know, it's an ongoing process, which this year was formed in the framework of a new subdivision. In 2016, innovation department was created, we call it "Creative Bureau". It is noteworthy that innovation is not a goal in itself. Innovations regarding filling stations aimed at making our services as simple, convenient as possible and saving time.

- How SOCAR working principles are managed from central office in Baku and control over them carried out?

Igor Orlov: You know, business strategy in Ukraine is determined by highest business and ethical standards of parent structure. And corporate governance principles for control purposes are mainly traditional for vertical-integrated companies.

- In July this year, Presidents of Azerbaijan and Ukraine, Ilham Aliyev and Petro Poroshenko discussed in Baku possibility of resuming the project of the Odessa-Brody pipeline. Is the mentioned pipeline ready to transport Azerbaijani oil through the territory of Ukraine? Are there any talks in this direction?

Andrey Bychkov: Of course, the pipeline is ready from technical point of view. However, this is legally and politically complicated matter. The talks have been continuing. Their logical conclusion is possible but, unfortunately, there is no further comments yet.

- How do you assess results of the first delivery of SOCAR oil at the Mozyr refinery in Belarus and will the delivery continue?

Andrey Bychkov: This is an important customer for Azerbaijan, with whom negotiations were conducted last few years. As far as I know, occasional deliveries were carried out, however, the sides failed to agree on a permanent operating conditions. I hope that this will be possible in the near future.

- Are opportunities being considered to conduct deliveries to Ukrainian plants for refining purposes, especially to Shebelinka "Ukrhazvydobuvannia"?

Andrey Bychkov: Talks were held with the Shebelinske gas refinery earlier this year for broad fraction of light hydrocarbons, however, conditions economically not profitable to us . As we know, SOCAR's central office has not conducted talks with the Shebelynka gas refinery. But taking into account rapid development of the "Ukrhazvydobuvannia", their new management, new approach to work, it is possible that negotiations will resume soon.

- Do you think SOCAR Ukraine can overrun the Ukrainian market?

Andrey Bychkov: There are plans to enter the market of Moldova, since it is controlled from Ukraine. However, this market is quite smaller than the Ukrainian, but it has prospects for development. We also do not rule out cooperation with the Moldovan government agencies.