Oil refiner Hellenic Petroleum (ELPE) yesterday said it plans to gradually shift gear to upstream operations in order to stave off the repercussions arising from volatile international oil prices. The announcement came as the company reported a hefty fall in earnings last year as a result of a sharp drop in refinery margins. Earnings before interest, tax, depreciation and amortization were down by 68 percent to 74.3 billion drachmas (218 million euros) from 142.4 billion drachmas (418 million euros) last year. Consolidated profits before taxes and after minorities last year fell by 72 percent to 26.5 billion drachmas (77.77 million euros) from 94.7 billion drachmas (278 million euros). Profits after taxes and minorities slid to 12.5 billion drachmas (36.7 million euros), a 79-percent drop. ELPE said earnings were hit hard by the more than 50-percent fall in international refinery margins last year to $2.43 per barrel from $4.92 in 2000. Continued low margins for chemical products and the negative inventory effect resulting from low crude prices also dented profits. ELPE’s profit fall was much bigger than expected, said Alexandros Boulougouris, energy analyst at P&K Securities. «The company was hit hard in the last quarter of the year. The Thessaloniki refinery, in particular, was a loss-making concern,» he said. Managing Director Athanasios Karahalios, who took up his post only last month following the resignation of chief executive Eleftherios Tzellas, said the company plans to diversify into upstream activities, following the example of its counterparts abroad, in order to offset oil price fluctuations. «We are moving gradually to change ELPE’s portfolio and expand into upstream operations,» he said. ELPE’s decision to diversify into upstream activities makes sense as the company has little scope for growth in the domestic market where it is already the market leader, said Boulougouris. «It’s difficult for it to move into the European downstream market because of the greater competition and risks.» The analyst said the question is whether ELPE has the expertise to succeed in upstream operations. Under its upgraded five-year business plan, the company aims to link up with other businesses in exploration for hydrocarbon deposits abroad. ELPE’s diversification strategy also includes electricity production. Karahalios said the company is set to announce the identity of the foreign company next week with which it will set up a power generation plant in Thessaloniki. He said the project should get started in 2004 when Greece is projected to face an energy shortage. The ELPE managing director said the company plans to appraise the value of its 35-percent stake in DEPA, the natural gas company, before making a decision. The company will propose a dividend of 0.12 euros per share at the general assembly. The development ministry is due on March 8 to ask Austrian oil group OMV and the consortium of the Latsis Group and Lukoil to submit binding bids for a 23-percent stake in ELPE. He said the project should get started in 2004 when Greece is projected to face an energy shortage. The ELPE managing director said the company plans to appraise the value of its 35-percent stake in DEPA, the natural gas company, before making a decision. The company will propose a dividend of 0.12 euros per share at the general assembly.