Statoil offers to buy all of Shell's Baltic gas stations

Norwegian fuel giant Statoil on March 22 signed a non-binding agreement to buy the retail fuel stations of Shell Europe Oil Products in the Baltics.

The initiative to sell the stations came from Shell.

The deal would make Statoil the largest fuel retailer in the market. Shell's 60 stations would give it a total of 151 in Estonia, Latvia and Lithuania.

Statoil would control roughly 25 percent of the Baltic retail fuel market.

"(The deal) depends upon the market inspections of the respected countries whether the deal can be carried out," said Epp Kiviaed, director of Eesti Statoil, Estonia's Statoil subsidiary.

The companies did not reveal the price of the proposed deal.

Statoil previously tried to expand on the Baltic market in 1999, when a merger with the Neste network in Poland, Russia and the Baltics was considered but never carried out.

Upon completion of the deal, Shell will wind up most of its services in the Baltics, except the distribution of lubricants and motor oil, within five months.

Maris Liepins, sales director for Hydro Texaco in Latvia, told BNS the Statoil-Shell deal would not affect Hydro Texaco dramatically as it mostly runs self-service stations similar to Neste's.

Other observers say the retail fuel market will not change significantly on account of the deal because no new stations would be built.

"It will be only a shuffle of customers," said Ivan Paleychik, head of Lukoil Baltija.

In an interview on Latvian Radio, Paleychik said customers would benefit from Statoil's expansion.

"The more aggressive the competition is, the lower the prices are," said Paleychik.

Other competitors were not so pleased with the deal.

Heiti Haal, director of the Estonian company Alexela Oil, said he would apply to regulators to consider Statoil a monopoly should the deal go through.

But according to Estonian law a company must control at least 40 percent of the market to be considered a "a company with significant market power," which must meet higher standards of quality and prices.

Veli-Pekka Helander, deputy director of Neste Markkinointi Oy, told the Finnish newspaper Kauppalehti that he was surprised to learn that Shell was giving up the Baltic market.

Although Shell has made no significant investments in the Baltic countries recently, it has a sizable share of the market, Helander said The problem they likely face, he said, was profitability.

"Baltic gas stations are overinvested and their owners have profitability problems," said Helander. "We (Neste) have solved the problem by switching to automatic stations."

Both Statoil and Shell have faced tough times in the Baltics, particularly Estonia, in recent years.

Shell lost 66.86 million kroons ($3.8 million) on sales of 435.34 million kroons in 2000. In the same year Statoil lost 26.5 million kroons on a turnover of 659 million kroons.

Shell has faired far better in Latvia this year. After several loss-making years, the company turned a profit of 1 million lats ($1.56 million) in 2001 on sales of 23 million lats.