Lukoil Lubes Go West

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Russian oil major Lukoil acquired Austrian energy group OMVs lubricants business, in a bid to become a key player in the European lubricants market. The transaction is expected to close by the end of this year. Terms were not disclosed.

Under the deal, LLK-International bought OMVs lubricant sales and distribution operations across nine countries in West, Central and Southeast Europe (Germany, Austria, Czech Republic, Slovakia, Hungary, Slovenia, Serbia, Romania and Bulgaria). The deal also includes a 35,000 metric tons per year blending plant near the Austrian capital of Vienna, and the Bixxol motor oil brand. However, the transaction does not include OMVs lubricant business in Turkey operated by its subsidiary Petrol Ofisi.

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LLK is Lukoils lubricants arm and the biggest lube marketer in Russia.

The deal is expected to result in significant expansion of the companys range of products in Europe, LLK said in a July 1 press release. This will [also] strengthen the position of our lubricants in the foreign markets, and will give a new opportunity to ship Lukoils premium products portfolio in all the listed countries.

The companys main strategy is further development of its lubricant business on European soil, according to Lukoils president Vagit Alekperov. Favorable geographical position in relation to the foreign OEMs and enterprises, the developed distribution infrastructure in Europe, its modern industrial capacities, unique scientific know-how and extensive professional experience of the workforce – those are the most significant factors that swayed our decision, he said.

The deal is also important for the Russian oil major because it can achieve synergies with LLKs Austrian operations and its operations in Romania and Finland. The deal will optimize lubricant supply to the foreign partners, it can enhance Lukoils scientific and technical opportunities in new formulations development area, and provide sales growth, the company stated in its press release. In Europe, the company operates a 30,000 t/y blending plant in Ploiesti, Romania, and a 32,000 t/y plant in Hamina, Finland.

OMV said that 74 employees across the nine countries who work in the lubricants business will retain their jobs. This transaction is a next step in the implementation of our strategy to optimize and simplify our refining and marketing portfolio, Manfred Leitner, the companys executive board member, said in a June 28 press release.

OMV and its subsidiaries in Turkey and Romania (Petrol Ofisi and Petrom) have already concluded several sales as part of its diversification program. Recently concluded transactions include the sale of its subsidiary in Croatia at the end of May and the sale of its subsidiary in Bosnia-Herzegovina in March. OMVs strategy aims to gradually shift the weight of capital share from refining and marketing to exploration and production, the company said.

OMV is the largest listed oil and gas company in Austria, and its sales amounted to 42 billion (U.S. $54.7 billion) in 2012. In exploration and production the company is active in two core countries, Romania and Austria, and holds a balanced international portfolio. In refining and marketing, the company has a refining capacity of 22 million t/y and as of the end of 2012 operated with approximately 4,400 filling stations in 13 countries, including Turkey. OMV further strengthened its position through the ownership of a 97 percent stake in Petrol Ofisi.

LLK is Russias biggest lube marketer. In 2012 it produced 1.23 million tons of base oils and lubricants and held 48 percent share of Russias lubricant production, according to the companys latest annual report. Last year the company sold 358,000 tons of packaged lubricants, or 13.3 percent more compared to 2011. It manufactures 103 different types and brands of oils and additives, and its finished products are sold in 103 countries across the globe. LLK operates three base oil plants and one blending plant in Russia. In addition to its blending plants in Romania and Finland, it has one plant in Turkey.

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