Russia’s Lukoil Studies Selling Ukhta Refinery, Filling Stations

Lukoil, Russia’s second-biggest oil producer, will discuss later this year the possible sale of its Ukhta refinery and one-third of its filling stations in Russia, according to Vladimir Nekrasov, the company’s first vice president for refining.

Lukoil is expected to make a final decision on the possible sale in the fall, Nekrasov told reporters, as quoted by Reuters.

Lukoil’s investment committee will review the proposal in July, and the final decision is expected to be made in October or November this year, Russian media quoted Nekrasov as saying.

Last week, Russian news outlet RBC reported that Lukoil is looking for a buyer for its Ukhta refinery—which has an annual capacity of 4 million tons—and is reportedly ready to sell it at a discount to its market price.

Lukoil is ready to sell Ukhta refinery—together with the filling stations or separately—and would invest the proceeds in upstream projects in Russia, a source at Lukoil told RBC. The profitability of the Ukhta refinery has shrunk due to higher taxes and the general downturn in the industry amid the oil price crash.

Some analysts reckon the refinery could cost no more than $50 million, but RBC analysts believe that the price of the asset would greatly depend on additional terms of a possible deal such as supply of oil or obligation to supply oil products.

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According to RBC sources, the most likely candidates to buy the refinery include Russian companies Russneft (not to be confused with Rosneft), ForteInvest, and New Stream Group.

In June last year, Lukoil’s chief executive Vagit Alekperov told Reuters in an interview that the company might consider spinning off or selling its downstream assets in Europe to focus on exploration. Lukoil is shifting its focus to upstream assets and development both in Russia and abroad, Alekperov noted back then.

By Tsvetana Paraskova for Oilprice.com

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