Is Lukoil preparing an exit strategy from the Croatian market?
Is the Russian company Lukoil, one of the world’s leading companies in the production of oil and gas, leaving Croatia? This question has arisen after Lukoil Croatia, according to several different sources, lost the right to use storage facility at the JANAF terminal in Omišalj on the island of Krk. Lukoil used the storage facility to supply the market from its refinery ISAB in Sicily in Italy, reports Jutarnji List on November 17, 2016.
Lukoil does have a small storage facility at the oil terminal in the port of Vukovar, but its capacity is not significant. Omišalj was a kid of a hub for supplying the Mediterranean market. The company had 10,000 cubic metres for storage of diesel, which makes three-quarters of its sales. Lukoil has 52 petrol stations, with about 30 being in their direct ownership, while the rest is franchise.
In other words, Lukoil does not even have 10 percent of the retail market of oil products in Croatia, which was their goal when they entered the Croatian market in 2008. Moreover, the company has not been profitable for the last five years and in 2015 it recorded a loss of 16.5 million kuna. That is the reason why many in the oil business think that this could be the end of Lukoil’s presence in Croatia. Some experts are convinced that the company could leave Croatia since, according to the company’s new strategy, it is abandoning a large part of Europe.
However, others point out that the storage facility at Omišalj was of negligible capacity and that the company can substitute it with other sources, for example by buying more products from INA, Petrol and Crodux. They believe that the loss of the storage facility is not linked to the new strategy and that the company will not just leave after ten years of operations on the Croatian market.
A few years ago, the Russian company began its exit strategy from Central and Eastern Europe, and later from the Baltic countries as well, due to anti-Russian mood and European sanctions that have affected Russian companies, and partly also due to the optimization of the retail network.
Oil expert Davor Štern says that the withdrawal of the Croatian branch director Nicolay Ivchikov earlier this year and his transfer to Cyprus was already an indicator of Lukoil’s departure. “He was a pioneer of purchasing chains of petrol stations in Croatia, but they never planned to have more than 100 petrol stations. They have still not reached that number, and for a large company such as Lukoil even one hundred petrol stations is nothing”, said Štern.
