Lukoil strikes provisional deal for sale of its foreign assets to Carlyle

Lukoil announced that it signed an agreement to sell its international business under US sanctions to investment firm Carlyle, based in Washington DC. Nevertheless, the Russian integrated oil company is negotiating with other suitors as well.

A looming oil and fuel crisis in Southeastern Europe that the United States initiated by sanctioning Russian companies is apparently on the way toward resolution. After Hungary-based MOL agreed to take over Gazprom-owned NIS in Serbia, Lukoil announced that it intends to sell its international assets to Carlyle.

The tentative deal that they signed excludes Kazakhstan, which intends to buy out Lukoil’s on its territory.  The US has already excluded the assets from the sanctions.

The two sides signed an agreement for Lukoil International, but the Russian oil giant pointed out that it is “not exclusive” and that it is continuing negotiations with other potential purchasers. According to earlier media reports, ExxonMobil, Chevron, Abu Dhabi National Oil Co. (ADNOC) and others were reportedly interested in some parts of Lukoil’s overseas portfolio.

The companies didn’t reveal a figure for their proposed transaction. Lukoil said the acquisition depends on regulatory approvals. They include a permission of the US Department of the Treasury’s Office of Foreign Assets Control (OFAC), which handles sanctions.

One divestment attempt was blocked by the United States in November. Lukoil was negotiating with Gunvor Group. The US also scuttled a bid by Xtellus Partners, in mid-December.

US sanctions affecting refineries, service stations throughout Balkans

Lukoil’s businesses abroad were worth an estimated USD 22 billion in 2023. The facilities up for sale include the largest oil refinery in the Balkans – Lukoil Neftohim Burgas in Bulgaria, as well as the Petrotel-Lukoil refinery in Romania. It also has fuel retail networks in Romania, Bulgaria, Turkey, North Macedonia, Croatia, Serbia, and Montenegro.

The sanctions are particularly sensitive for Serbia, where NIS and Lukoil hold over one quarter of fuel stations in Serbia.

Carlyle vows to reinvest Lukoil’s free cash flow

Carlyle Group, a global investment firm based in Washington DC, promised “operational continuity, preserving jobs, stabilizing the asset base and supporting safe, reliable performance.” Importantly, it vowed to reinvest free cash flow to prop up performance in the long term.

Due diligence procedures are necessary, it stressed. Notably, Carlyle International Energy Partners is a majority owner of Black Sea Oil and Gas (BSOG). The Romanian-based independent energy company is involved in biomethane and offshore wind power projects. The European Bank for Reconstruction and Development (EBRD) has a minority stake.

As for NIS, MOL acknowledged the possibility of forming a joint venture with ADNOC as a minority partner. Together they would control the only refinery in Serbia and the said service station chain.