| Lukoil Georgia Promises to Supply Georgia with European Standard Products |
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21/04/2009 15:13 (213 Day 16:25 minutes ago) | |||||
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The FINANCIAL -- In his interview with The FINANCIAL Zaza Katamadze reviews the year 2008 and says that LUKOIL Georgia is offering its customers the new environmentally friendly product euro 5. “Euro 5 is a new generation of fuel specially produced for the European market. Georgia is the first country in the region where Euro 5 has become available,” Katamadze states.
“Our fuel is of the highest European standard and there is no question about it,” says Zaza Katamadze, General Director of LUKOIL Georgia, one of the leading oil importers in Georgia. Despite the effects of the global economical crisis, LUKOIL believes that the year 2009 will be full of challenges but promises that the company will continue to supply Georgia with European standard products, improve their services daily and offer customers innovations.
“Together with fuel quality we also offer high quality service,” Mr. Katamadze claims.
“We promise to continue supplying Georgia with European standard products, to daily improve our services and offer customers innovations. At the same time we are going to continue to support Georgia in improving its economy and the wealth of the population. LUKOIL Georgia is loyal to the slogan “European quality for a European future”,” Katamadze states.
In his interview with The FINANCIAL Zaza Katamadze reviews the year 2008 and says that LUKOIL Georgia is offering its customers the new environmentally friendly product euro 5. “Euro 5 is a new generation of fuel specially produced for the European market. Georgia is the first country in the region where Euro 5 has become available,” Katamadze states.
“The year 2008 started with rapid growth of the Georgian economy and we faced record sales for the first six months. But last year will fill our memories with several other less attractive events. The most harmful for our country was in August, 2008 - the war. This dreadful event in combination with the global financial crisis led our country to quite weak economic conditions.”
Q. How has the global and local financial downturn affected your company?
A. From a global point of view the industry we operate will become more attractive for customers as soon as prices start to fall dramatically. However the financial crisis affected a number of other industries and segments worldwide. Currently the demand for fuel in Georgia is significantly lower in comparison with the same period last year.
Q. Due to the recession most of the leading companies have cut their staff, has your company reduced its workforce in 2008 and by how many?
A. LUKOIL Georgia pays special attention to the management of human resources. For years we have been putting in place strong mechanisms to protect our staff, create a safe and healthy working environment, provide a competitive benefit package to increase motivation and productivity. All these efforts cannot be wasted and we will continue caring for these people who have been loyal to the company and excelled in their everyday work.
We do our best to prevent layoffs and keep our staff. We value their dedication and loyalty and offer stable working conditions and salary in return. We will go through the difficult times together, because the management of LUKOIL Georgia strongly believes in investing in people, giving them opportunities to learn and grow as the company evolves and expands.
For the period of the economic downturn we have not planned any actions in this respect.
Q. In terms of quite big competition, LUKOIL Georgia still manages to keep its leading position on the Georgian market, how does your company manage it?
A. The main reason why customers should choose LUKOIL for its fuel is the quality. This is the first and the most important factor which at the same time is the primary one in our view. No matter how well you try to present something if the quality is not of the highest standard there is no opportunity to be even close to the leader;s position.
Our fuel is of the highest European standard and there is no question about it. Together with this quality we also offer high quality service.
At LUKOIL Georgia we believe that we have a very special approach to customer care. We will not diminish the merits of our competitors, and thus, can talk only about products and services that we provide to our consumers. On a daily basis our company serves thousands of retail and corporate clients. In order to be more responsible and responsive to what people’s needs are we were the first petroleum company to introduce a hotline where every client can call and share their opinion, ask for assistance or urge us to resolve a certain situation. We enjoy compliments, but on the other hand we have very strict and critical assessment procedures for our staff, especially operators, who have direct contact with consumers. Even though we run the biggest network of gas stations, we are still working hard to enlarge it both in the capital and regions so that we are more accessible and visible.
Q. Who are your main competitors on the local market?
A. We consider different companies to be our competitors, in various segments though. In Georgia there are five large fuel station networks. Each of them has its own competitive advantages and positioning specifics. The competition in the industry is very tight and as a result customers have a wide variety of products, services and prices.
Q. What are the guarantees of the products that you offer to your customers?
A. The first and foremost warrant is our worldwide name - LUKOIL , which positions itself as the supplier of premium quality products. The company operates in more than 30 countries and trust from customers is its most valuable asset.
We can provide certificates of quality and origin for all of our products to prove their accordance to the euro 5 standard.
Q. Recently prices of oil have been changing very often; the cost of oil has significantly decreased abroad. Did your company reduce prices on oil in 2008 and by how much?
A. The fuel prices in Georgia primarily depend on international prices; we have therefore followed the trend and reduced prices several times.
Today (10 April) prices on some of our products are the lowest on the market despite the fact that the quality of them does exceed our competitors’ offerings.
Q. Globally prices of oil have decreased 3 fold and in Georgia only 2 fold. Many of the oil producing companies in Georgia don’t cut their prices on offered products, even during a time of global price cuts. Some of the companies say that they have not reduced their prices on oil products because that was the price at which they bought them. Do you agree with this idea?
A. We do not agree that the prices in Georgia have not significantly changed. However we would like to emphasize several issues that affect the local market.
Prices of fuel depend on the international prices of crude oil. The production of fuel obviously has additional costs and markups itself and it is an internationally tradable product as well. Consequently international prices of oil and fuel do correlate but not linearly.
Moreover, we should understand that fuel carried to Georgia has additional costs like transportation, storage etc. Exchange rates have an important impact as well. Our market is considerably smaller compared to average sized European markets and we are not able to enjoy any economies of scale. Therefore, the mentioned “3 fold” decrease of oil prices has not and could not have been mirrored in the Georgian market directly.
Q. From which countries does LUKOIL Georgia import different kinds and levels of oil?
A. We import all products from Bulgaria - from the refinery LUKOIL Neftokhim Burgas. This refinery operates in accordance with the euro 5 standards and is a branch of JSC LUKOIL .
Q. Please provide plural data of your company’s sales in 2008 and compare it with the year 2007.
A. Beginning with 2002 till the middle of 2008 the Georgian economy was facing rapid growth and the petroleum industry was no exception. Our sales growth trend is expressed by impressive percentages. However well known factors in the middle of 2008 in combination with the global financial crisis threatened the Georgian economy. The sales of all companies and brands thus shrank globally. We also encountered a decrease in sales. However LUKOIL Georgia is looking forward to the future and will work hard with its partners to cope with the global financial crisis.
Q. How have you developed your network since the year 2007, up to the year 2009?
A. At the end of 2008 we were operating the largest network in Georgia - 65 filling stations. This number includes not only stations owned by LUKOIL but also the franchise’s ones.
We cover all of the regions of Georgian.
Q. Did the numbers of oil consumption decrease before and after August’s events in Georgia?
A. Up until the August 2008 events we, as well as most of the industries in Georgia, were facing rapid growth of demand. The following period in combination with the global financial crisis mean that the market downturn started becoming evident.
Q. During the August war in Georgia, many Georgians trying to leave the country with their cars rushed to the oil stations to fill up on fuel. How did your company serve its customers during that hard time and did you have enough supply to serve all the customers?
A. During the most turbulent and stressful conditions of the month of August there was not a minute when LUKOIL Georgia closed any of its gas stations. On the contrary, we felt we had to work even harder to support the Government of Georgia in keeping up the spirit and confidence of regular citizens by offering non-stop service and providing an unlimited supply of petroleum products.
Q. How do you control the quality of your products?
A. JSC LUKOIL has very strong internal procedures of quality control. The company supplies Europe and Georgia from the same refinery and therefore quality requirements are the same. In Georgia we have special procedures to control safety and service quality at our stations regularly. The evaluation includes promotional as well as penalty procedures for certain stations and personnel.
Q. What does your company to help protect the environment?
A. Due to the peculiar nature of our activity any petroleum company should bring environment and safety issues to the top of their priority list. With the current global climate change issue this is even more important. There are many speculations on the financial crisis, but we believe that the environmental crisis that is still to come will have no less impact on every country on every continent.
Euro 5 is a new generation of fuel specially produced for the European market. It is extremely environmentally friendly without any harmful emissions; therefore it is safe for humans and the nature surrounding us.
Euro 5 is a clean product indeed and in addition to its technical superiority it will make a difference in the long-run when we become mature enough to address the pollution issues, especially in Tbilisi with our increasingly heavy traffic.
We are positive that Georgian drivers will appreciate the costs and benefits of euro 5 as by buying a certain quantity they will be able to cover longer distances in comparison with ordinary fuel. Euro 5 will save the money and time that drivers spend repairing their vehicles.
Q. What kind of investments has your company put in different activities in 2008?
A. We believe that we have two most valuable assets for continuous growth and success in the long run: trust from our customers and the loyalty of our employees. In 2008 major investments were made to deepen customer relationships and to improve the knowledge and competence of our staff.
In 2008 we presented for the first time to Georgian customers euro 5 standard fuel.
Q. What new products have you offered to customers in 2008 and at the moment?
A. In 2008 we introduced the euro 5 standard fuel. Georgia is the first country in the region where euro 5 has become available. By having euro 5 Georgia is taking one step forward towards becoming equal with the west.
Q. Do you plan to offer novelties to your customers and what kinds of novelties will they be?
A. Any kind of innovation should be planned and introduced based on the market requirements. We always welcome new challenges that arise from the diversified tastes and preferences of customers.
We pioneered a banking card payment option in our sector and introduced the euro 5 standard. We always try to hold the pulse of the market and are ready to respond immediately to any changes in demand.
Q. Company SOCAR has quite an important role on the Georgian market and is quite a privileged company on the said market. How competitive is the Georgian market is or is it monopolized?
A. The Georgian market is quite diversified. There are five large and many small networks of fuel retailers and a number of independent stations.
The large networks import fuel from different refineries and do not depend on one another. Prices are set in accordance with individual costs and market conditions. There are no limitations and/or restrictions on import. Due to the mentioned factors we cannot consider the Georgian fuel market to be monopolized.
Q. Which is the highest qualified oil offered by your company? What amount of oil is imported from Europe and what amount from Azerbaijan?
A. We import 100% of our products from Europe. We supply Super, Premium Avant-garde, Euro Regular and Euro Diesel. All of these products are of euro 5 standard. It should also be noted that the quality of our products is significantly higher than the set requirements of Georgian Legislation.
Q. Is Azerbaijan’s oil less well qualified or is it able to compete with the European oil level?
A. The octane number, so popular in Georgia, is not the only dimension that describes the quality of fuel. Though RON of Azeri or Turkmenistan products may be the same as European it does not mean that the quality and energetic efficiency are the same as of Euro standard requirements.
The contents of the unhealthiest additives (lead, sulphur and benzene) in the European fuel are much lower than in any other oil products of the above-mentioned countries. Therefore fuel export from Azerbaijan and Turkmenistan to Europe is currently impossible.
Q. What is the percentage of your corporate clients?
A. The customer base varies year by year. In 2008 about 60% of our sales were accounted to corporate sales. Our corporate clients include all types of both Government and private organizations and institutions.
Q. What are your forecasts for the year 2009?
A. The year 2009 is full of challenges - international business has to cope with the financial crisis, all brands have to regain market positions and work hard to reach their financial and sales targets. We promise that we shall continue to supply Georgia with European standard products, daily improve our services and offer customers innovations.
At the same time we are going to continue to support Georgia in growing its economy and the wealth of the population. LUKOIL Georgia is loyal to the slogan “European quality for a European future”.
Written By Tako Khelaia
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