Lukoil expands in Estonia

The Baltic Times, TALLINN
Mar 23, 2000
By Kairi Kurm

Lukoil, the biggest oil company in Russia, is planning to increase its presence in retail sales in Estonia from 7 percent to 10 percent in the near future. The company is unifying its service stations with the Estonian Oilstop service stations under one company called Lukoil Tanklad and is planning to build four service stations in Estonia this year.

Both Lukoil Estonia and Oilstop have 13 service stations in Estonia. The retail sales of both companies reached about 120-130 million kroons ($7.5 – 8 million) last year. According to Vaido Virro, sales director at Lukoil Tanklad, Oilstop earned a small profit last year. The total turnover of Lukoil Estonia in 1999 was about 400 million kroons, said Aare Kauri, member of the board at Lukoil Estonia.

“The aim of unifying these two service stations was primarily to increase their profitability. It will also help to provide better petrol and more service stations to our clients,” said Virro. “The cooperation with such a well-known and strong partner is a big honor to Oilstop.”

Lukoil already has a strong presence in Lithuania and Latvia and is now planning to strengthen its presence in Estonia. Virro said that the company is planning to invest $1.5 million to $2 million this year.

“Lukoil fell behind Neste and Statoil in Estonia all the time. The timing of the unification of these two companies is not unexpected,” said Haim Kogan, head of Lukoil Baltic region. “Lukoil is hoping to bring its market share up to 25 percent -30 percent in the Baltic countries,” said Kogan.

Statoil’s share in Estonia is about 20 percent, and in the Baltic states it is a little bit above 20 percent, said Epp Kiviaed, head of Statoil Eesti. The main service stations represented in all three countries are Neste, Shell, Lukoil and Statoil. Kiviaed said Hydro Texaco is also planning to increase its presence in these countries.

The management of Lukoil says the advantage of Lukoil petrol lies behind its good price.

“We keep our prices on an average level. We sell the same product as Statoil or Shell, but we can offer it for a much cheaper price. People from ex-Soviet republics believe that Western products are better,” said Kogan.

Kiviaed said that Estonian service stations sell Danish petroleum, but Lithuanian stations sell the same petroleum as Lukoil does, which is actually a little bit more expensive. She said she believes that the unification of two companies may decrease the number of clients, because some might not want to stay in the new company.

Lukoil is most active in Lithuania, where it has more than 60 service stations and a market share of 25 percent on the retail fuel market. In Latvia, the company holds a 10 percent market share with about 13 stations. All in all, Lukoil has about 1,000 gasoline filling stations in Russia and the other former-Soviet republics.

The Lithuanian market is in best of order in terms of smuggled petrol, but the Estonian market needs a helping hand from the government, said Kogan.

“The share of illegal petrol is big in Estonia and Latvia, especially in Estonia. The government is taxing wholesale, but should also pay more attention on how much money is circulating in retail,” said Kiviaed.

Source: http://www.baltictimes.com/news/articles/1654/

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