Shell Sells Russia Business to Lukoil


Shell Sells Russia Business to Lukoil
Lukoil building in Tyumen, Russia. © Andrey Sedoy

Oil giant Shell signed an agreement to sell its retail and lubricant businesses in Russia to privately owned Lukoil, the largest lubricant marketer and second-largest oil company in the country.

Subject to Russia’s regulatory approval, the sale is expected to be completed later this year. Neither company disclosed the price of the transaction. A spokesman for LLK International, the lube arm of Lukoil, declined to give additional details.

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Shell joined a other Western energy companies, such as BP, pulling back in Russia to protest that country’s military invasion of Ukraine. Shell has vowed to halt all operations in Russia.

“Given the circumstances, Shell needs to sell its assets in Russia,” Steve King, consultant of the U.K.-based SJK Marketing Services, told Lube Report last week. “It is a good opportunity for Lukoil to pick up a lot of service stations,” he said, and to acquire Shell’s lubricant production to strengthen its position on the Russian market.

The deal includes 411 retail stations, mainly located in the central and northwestern regions of Russia, and a lubricant factory in Torzhok, around 200 kilometers northwest of Moscow.

“The acquisition of Shell’s high-quality businesses in Russia fits well into Lukoil’s strategy to develop its priority sales channels, including retail, as well as the lubricants business,” Maxim Donde, the company’s vice president for refined product sales, said in a May 12 press release.

“Our priority is the well-being of our employees,” said Huibert Vigeveno, Shell’s downstream director. “Under this deal, more than 350 people currently employed by [subsidiary] Shell Neft will transfer to the new owner of this business.”

Work was already underway to expand the Torzhok plant from its capacity of 180,000 metric tons per year.Last year Shell began an $80 million project to increase capacity to 270,000 t/y by next year. No update was given on the status of that project.

The plant, operated by a workforce of 150, supplied 80% of the lubricants sold by Shell in Russia and some neighboring markets.

Shell holds approximately 15% of Russia’s lube market, according to estimates by the analytical firms GFK and Millward Brown. In 2021, Lukoil held around 40% of the country’s combined output of base oils and finished lubricants. Russia consumed 1.72 million tons of finished lubricants in 2019, according to B2X, a Moscow-based consultancy.

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