In an interview with Russia Today, Sergey Bogdanchikov, President of one of the largest Russian oil companies, Rosneft, spoke about the reduction of the company’s massive debt burden.

Russia Today: Rosneft recently acquired former Yukos assets. What use do you plan to make of them?

Sergey Bogdanchikov: Along with the Yukos assets, we acquired their liabilities which have increased Rosneft’s total debt to $26 BLN dollars. Although this does not affect our ability to function, we plan by 2010 to reduce our debt as a percentage of total assets to 30%. We will then be in line with Russian and international standards. We will squeeze greater profitability from our new assets and channel it into paying this debt, along with converting our short-term liabilities into long-term ones.

RT: Rosneft is significantly behind Western competitors in terms of refining capacity. How are you going to address this?

S.B.: We've just hit the target of refining 50% of our oil this year. But our company is 12 years old and refining capacity is still far behind Western competitors like Exxon Mobile and Total. We will increase the proportion of refined oil in two ways. First, by  tripling capacity at our original refineries in Komsomolsk, East Siberia, and Tuapse, near Sochi. Secondly, we will join forces with emerging market players. We have already found a site and are performing due diligence on a joint venture with the China National Petroleum Corporation to build a 10-million-tonne per year capacity oil refinery near Beijing by 2010.

All the world’s oil majors are now set on China. We see the Chinese oil products market doubling and petrochemicals tripling within a decade. As a new entrant to the Chinese market we will expand through joint ventures with local companies, not on our own. The Chinese refinery project will cost us several billion dollars and we will not risk making mistakes by branching out on our own.

RT: Do you have any concerns regarding the oil taxation regulations in Russia?

S.B.: All companies in Russia work on a level legal playing field, be they Western or Russian. ConocoPhilips for one has significant shareholdings in Lukoil. But the current tax regime in Russia makes it difficult for all of us. We believed the tax regime in East Siberia was too harsh, so a year ago oil companies won the right for sufficient  tax breaks to operate there as profitably as elsewhere. Proof of the law's success is that licences have continued to be sold there this year.

However, new regions require new approaches, notably the Arctic shelf and Russia's southern seas with their depth and lack of infrastructure. We will be lobbying the government for preferential terms in these regions, which we expect to become law by 2008.