RIGA - Russia's largest oil company began supplying the Baltics with its own gasoline last week in what analysts hailed as a major development in toughening competition in the local fuel market.
Lukoil delivered by train 2,000 metric tons of gasoline from its Nizhny Novgorod-based refinery on Jan. 29. The gas is high-quality, European-standard (Euro 4 and Euro 5) and will be sold at Lukoil's filling stations, Lukoil Baltija R said in a statement.
Haim Kogan, chairman of Lukoil Baltija R, said in the future the company plans to import 2,500 's 3,000 metric tons of gasoline per month.
Curiously, Kogan explained that imported gasoline is more expensive than analogous product from Lithuania's Mazeikiu Nafta, but since Lukoil extracts its own crude, and Mazeikiu Nafta doesn't, the final price of the two companies' gasoline is roughly the same.
Kogan also stressed the better reliability of rail deliveries than by tanker, which Norway's Statoil currently uses.
Traditionally, Russian gasoline products have comprised an insignificant share on the Baltic fuel market. From January to November 2006, Latvia imported 673 million liters of gasoline, of which 49.6 percent came from Lithuania, 43.3 percent from Norway, and nearly 5 percent from Belarus. Russia accounted for less than 1 percent.
The high-quality gasoline is made exclusively for export, since Russia, as well as other former republics of the Soviet Union, uses Euro-3 gasoline. Vladimir Kolosov, Lukoil Baltija's CEO, said that increasing market share in the Baltics, and other European countries, will depend on local demand for Euro 4 and Euro 5 gasoline.
Lukoil's decision to enter the Baltic gasoline market plays into its strategy of strengthening its downstream business throughout Europe. Over the past few years the company has been active in acquiring businesses and expanding its network of filling stations in Eastern Europe, though it hasn't forgotten Western Europe as well.
In its most recent high profile deal, Lukoil purchased 383 filling stations in six European countries from U.S.-based Conoco, including 156 stations in Belgium (which account for some 10 percent of the market). Conoco owns nearly 20 percent of Lukoil.
Thanks to the aggressive expansion plan, some 19 percent of Lukoil's gasoline in 2006 was refined outside Russia.
According to company data, Lukoil is the sixth largest oil producer worldwide and accounts for 18 percent of Russia's crude oil output.
Lukoil refined nearly 40 million tons of crude last year, Russia's Fuel and Energy Ministry reported last week.
In all, Russia produced 480 million tons of crude in 2006, up 2.2 percent year-on-year. Total refining grew 5.7 percent to 219 million tons, according to Interfax.
