Agency Approves Shell Sale to Lukoil

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Agency Approves Shell Sale to Lukoil
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Russia’s antitrust regulator approved last week Lukoil’s purchase of Shell’s retail and lubricants business in the country. The assets include a network of 411 filling stations and a state-of-the-art 180,000-metric-tons-per-year lube blending plant in Torzhok.

The Federal Antimonopoly Service approved the sale of 99.9% shares of Shell Neft, the British energy giant’s subsidiary in Russia, to Lukoil, the largest privately owned oil company in the country, according to a May 19 press release by FAS.

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The deal comes with a few caveats purportedly aimed at fair competition. Some of the conditions are regular sale of refined products by Lukoil at the commodity exchange and limiting the purchase of refined products to the exchange’s main session оf bidding.

Shell decided to exit from Russia following Moscow’s invasion of Ukraine at the end of February.

In its quarterly report released in April, the company wrote off its Shell Neft assets with valuation set at about U.S. $600 million. In the announcement for the report, Shell said it would write off $4 billion to $5 billion asset value after pulling out of Russia.

Due to sanctions leveled against Russia by some countries, demand for the country’s petroleum products is diminishing on international markets. Analysts said the sale by Shell presented a good opportunity for Lukoil to ramp up its domestic sales of fuels and lubricants.

“Besides the expansion of its sales in a number of regions where Lukoil is present, this deal would optimize the company’s logistic costs because of the convenient location of the acquired service stations,” Alexander Korneyev, analytic at Gazprombank, told the Kommersant daily on Thursday. “Also, it will expand its capacity in the high-margin lubricating materials sector.”

Lukoil is the largest lubricant marketer in Russia. In 2021 it covered about 40% of the country’s lube demand, which amounted to about 1.7 million tons.

Last year Shell supplied 14%-15% of demand in the country, Artem Mazaev, representative of OATS Solutions in Russia, told Lube Report last week. OATS is a British firm that provides information and productivity solutions for the lubricants sector.

Sources told the newspaper that the deal between Shell and Lukoil should be finalized this week and that Lukoil will start to supply its newly acquired filling stations with fuels and other finished products, including motor oils and car care products, by the end of May.

Shell fuel stations in Russia have been closed since May 15, after European Union sanctions against oil companies Rosneft and Gazprom Neft took effect. The companies were main fuel suppliers of Shell’s stations in Russia before the sanctions took effect.

Lukoil will begin rebranding stations right after the deal is closed, Kommersant reported. Shell’s retail business in Russia is the first of the company’s enterprises to be put on sale. The company participates in few more oil and gas exploration ventures in the country.

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