Anti-Russian Sentiment Pushes Lukoil Out Of Baltics

Citing anti-Russian sentiment in Eastern Europe, Russian Lukoil is selling some 240 gas stations in Lithuania, Latvia and Poland, as it seeks to optimize its retail assets in the oil price downturn.

The prospective buyer is Austria’s AMIC Energy Management, and the deal could close in the second quarter of this year, though final approval from the authorities is still pending.

Anti-Russian sentiment is running high in the Baltic States, and the new sale follows a similar move last summer in Estonia to divest 100 percent of its Estonian subsidiary Lukoil Eesti to a local energy company, Olerex.

But it’s not just the Baltics. In 2014, Lukoil also sold off its gas stations in the Czech Republic, Hungary and Slovakia.

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While Poland is scheduled to shed the Lukoil name sometime in 2016, the Latvian and Lithuanian stations will likely retain the Lukoil brand for the next five years. New buyers will have to distance themselves from the Lukoil brand in some other way in order to keep anti-Russian clientele from filling up elsewhere.

Poland, under a new government since October 2015, is no friend to Russia, and the new powers at the helm are fanning the flames of anti-Russian sentiment more than ever. There are even suggestions that the ruling party believes the plane crash that killed the Polish president’s twin brother, former president Lech Kaczynski in 2010, was the result of Russian sabotage.

It’s all been bad for business from where Lukoil is standing. And the ongoing conflict in Ukraine, plus rumblings in Georgia, will only make matters worse.

While Lukoil has said that the decision to sell the gas stations was part of a “program to optimize Lukoil’s retail asset structure in Eastern Europe,” more broadly speaking, the optimization is necessary because of anti-Russian sentiment.

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The decision to withdraw from the Baltics, according to Lukoil CEO Vagit Alekperov, was based on the fact that the company ‘’began to lose money and felt a negative attitude” towards them.

Alekperov also told Russian TV station Russia-24 that the Lithuanian and Latvian assets were being sold because of what he called a “fairly serious anti-Russian sentiment.”

All in all, it’s been a tough year for all oil companies, and for Lukoil this has meant a number of things.

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Earlier this week, Lukoil said its proved oil reserves were down to 12.585 billion barrels. The same period last year they were at 13.6 billion barrels. Lukoil’s total proved hydrocarbon reserves are down this year as well, to 16.6 billion barrels of oil equivalent. For the previous year they were at 17.59 billion barrels.

And while the company is courting a return to Iran, it’s pulling out of other big projects.

Earlier this week it announced that it was definitively withdrawing from its offshore Ivory Coast, where it’s been since 2006, after suggesting withdrawal in mid-January.

On Tuesday, shares of LUKOIL (OTCMKTS:LUKOY) opened at 29.65, compared with a one-year low of $25.88 and a one-year high of $53.78.

By Julianne Geiger of Oilprice.com

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