Russian lubricant marketers continue to struggle at home against foreign companies – many of them European – that have captured most of the domestic market for high quality, high-margin engine oils. That has not stopped the Russians, however, from venturing into Central and Western Europe, where quality is even more important. The latest move came in June when Russian petroleum giant Lukoil announced that it had bought most of the lubricant operations of Austrias OMV.
For many years, Russian lube marketers stayed out of Europe, except for parts of the former Soviet Union. That gradually changed after the turn of the millennium. Lukoil joined Atiel (the Technical Association of the European Lubricants Industry) as part of an effort to upgrade its engine oils to Western and Central European standards. Gazprom bought a small blending plant in Italy. Lukoil acquired small blending plants in Finland and Romania and built another in Turkey.
The OMV acquisition is similar to previous deals in that it includes hard assets along with technology. Expected to close by the end of this year, the deal gives Lukoils lubricant arm, LLK-International, control of OMV lubricant sales and distribution operations in Austria and eight other countries. The Russian company also obtained a 35,000 metric ton per year blending plant outside of Vienna and OMVs Bixxol engine oil brand. It does not include OMVs lubes business in Turkey, part of subsidiary Petrol Ofisi.
Analysts with Kline & Co. consultants said Lukoil has wanted to become a bigger player in Western and Central Europe and that the timing was good to take a more significant step.
As we know, Lukoil has global ambitions, and this is a step towards getting into the upper echelons of leading lubricant marketers, said Geeta S. Agashe, Klines senior vice president of energy. We think that the Russian oil companies are looking westward given the low price of many assets in Western Europe due to the ongoing recession in Europe. So, it makes for some good picking.
Kline officials said the deal should also help Lukoil in its ongoing effort to increase sales of higher quality, higher-margin lubricants. OMV is the leading lube supplier in Austria, and the com-pany has a reputation for having solid research and development programs. According to Parsippany, New Jersey, U.S.-based Kline, the biggest technical benefit may be that OMV has product approvals and relationships with automakers.
Having original equipment manufacturer factory- and service-fill approvals and access to an OEMs dealer and franchised workshop network is increasing in importance, Kline Project Manager George Morvey said. With new vehicle sales rising in developing markets… where knowledge of lubricants and preventative maintenance practices are at best limited, having your brand approved and recommended by the OEM at its franchised workshop can result in long-term customer loyalty and awareness.