LUKoil Downstream Investments Abroad.LUKoil Holdings (LH) was the first Russian oil company to move into the US market and acquired the retail chain of Getty Petroleum Marketing (GPM) in late 2000. It bought the company for $71m and in January 2001 took control of its operations. These consisted of about 1,300 gasoline stations and tank farms in the north-eastern and mid-Atlantic US states, and a wholesale petroleum products distribution network. GPM became the first publicly held US company owned by a Russian firm. GPM was a remnant of the Getty Oil empire of the late J. Paul Getty. The stations have since been rebranded Lukoil-Getty with a red-and-white logo. The number of LUKoil stations in the US now exceed 2,000.
(In 1997, LUKoil had moved into the US through a joint venture with Food Lion Inc. for supermarket forecourt petrol stations. But that experiment proved disappointing).
ConocoPhillips in 2006/07 enlarged its stake in LUKoil from 12.5% acquired in 2003, to add billions of barrels of oil reserves to its books. Since 2003, LUKoil had been keen on buying ConocoPhillips' 250,000 b/d Bayway refinery in New Jersey, the largest on the US East Coast, and for this it was willing to sell the extra shares to the US major.
LUKoil In Venezuela: In 2005 LUKoil signed an agreement with the state-owned Petroleos de Venezuela (PDVSA) for joint evaluation of a 678 sq km block known as Junin-3 in the Orinoco belt of ultra-heavy crude oil. The block is estimated to contain about 2 bn barrels of such crude. During a visit to Moscow in July 2006, Venezuelan President Hugo Chavez met with LUKoil's Azeri-born CEO Vagit Alekperov and the two reached agreement on joint development of Venezuelan oilfields. Since then, LUKoil's operations in Venezuela have expanded.
Alekperov, backed by the Kremlin, has been particularly keen on buying PDVSA's 50% equity in Germany's Ruhr Ol refining group, which the Venezuelan state company has been trying to sell since 2003. Ruhr Ol has stakes in oil refineries with a total capacity of about 500,000 b/d (see survey of Venezuela in omt22VenzTransNov26-07).
LUKoil European Holdings (LEH), based in London, was formed in January 2001 as the vehicle for the group's downstream acquisitions in Europe outside Russia. It has three refineries, one in each of Ukraine, Romania and Bulgaria, and 79.5% in Beopetrol which is Serbia's second largest fuel chain acquired in September 2003 for 117m. In mid-2002, LUKoil bought 16 gasoline stations in Cyprus from BP and ExxonMobil, which later carried the LUKoil brand.
With these and its Russian refineries, LUKoil still can only process about half of its crude oil production. Its aim is to raise this to 60% by acquiring additional refining capacity in East Europe. The group has about 5,000 petrol stations in Russia and abroad. In 2001, LEH was negotiating to take over Avanti, a petrol retailer based in Austria which then was on the brink of bankruptcy
The group has been radically restructured. It has brought its domestic and external refining and retail operations under a single division. The US and LEH operations are under this division. Units in this division now include LUKoil Eurasia, which is in charge of Central Asia, the Caucasus and Turkey, markets where the group intends to expand, now that high oil prices have raised its cash pile. In July 2008 LUKoil agreed to buy Turkish retailer Akpet, significantly boosting its downstream presence in Turkey. It was to pay over $500m for 100% of Akpet, Turkey's sixth-largest fuel retailer with 700 stations and 5% of the market. LUKoil plans to double its share of the Turkish fuel market to 10% within the next 10 years. Other Akpet assets include fuel terminals with 300,000 CM of storage. Six of these can be supplied by sea from LUKoil's two refineries in the Black Sea region, or its newly-acquired 320,000 b/d Isab refinery in Sicily.
LUKoil Ukrayina has 51% in an oil refinery in Odessa which it got in 1999 for $49m and a pledge to spend over $850m on the plant, with $450m spent by end-2001. LU in 2002 spent $30m on modernising the plant, and another $100m on expanding its network of stations in Ukraine. LUKoil's unit there has built an oil tank farm at Borispol, in the Kiev region, where a 12,000 t/y LPG terminal began operations in August 2002. From there LU's LPG sales have been extended to rival filling stations and to industrial enterprises under direct contracts.
LUKoil moved into Romania in 1998 and bought 87% in the old 70,000 b/d Petrotel refinery for $300m. LUKoil Romania's network now exceeds 250 outlets. LUKoil moved into Bulgaria in 1999 when it bought 58% in the 125,000 b/d Neftochim refinery at Burgas for $509m. In Poland, where it has LUKoil-branded stations, LUKoil (49%) and Rotch Energy of the UK (51%) have jointly bid for 75% of the 90,000 b/d Gdansk refinery on the Baltic Sea. But the tender was cancelled. On Aug. 28, 2006, LUKoil said it would launch a joint venture with Slovenia's oil company Petrol to sell gasoline across the Balkans. LUKoil was to hold 49% of the venture, with Petrol owning the other 51% (see the background of its Western acquisitions and plans in omt10RusOverseas-Sept4-06 & down10RusOverseas-Sep4-06).