The latest sanctions imposed on the Russian energy sector by Joe Biden's administration just before the inauguration of the new U.S. President Donald Trump caught Lukoil at a critical moment in the process of selling off its Bulgarian assets. The procedure began at the end of 2023, with many candidates becoming clearer by early November last year. The process is now in the phase of negotiations with the strongest bidders and the final outcome is expected soon.
Lukoil's business in Bulgaria includes oil refinery Lukoil Neftochim Burgas, the largest company in the country with revenues of 8.6 billion levs (4.3 billion euro) and a profit of 203.6 million levs for 2023. The second-largest is fuel distributor Lukoil Bulgaria, which also reported a high profit of 128 million levs and revenues of 6.3 billion levs for 2023. The company operates wholesale storage facilities and a retail network of over 220 locations. Lukoil's business also includes two smaller companies - Lukoil Bulgaria Bunker and Lukoil Aviation Bulgaria.
SOCAR, MOL and the others
From the very beginning Azerbaijan's SOCAR has been considered one of the strongest strategic investors, given that it owns a huge refinery in Turkey. Lukoil and SOCAR have partnered on several occasions over the years. A few years ago SOCAR signed an agreement with Lukoil under which the Russian company provided 1.5 billion dollars in funding and supplied SOCAR's STAR refinery in Turkey with up to 200,000 barrels per day of Russian crude. However, some concerns were raised about SOCAR's financial capacity. According to Azeri media reports, SOCAR's net profit for the first half of 2024 reached 908.8 million dollars, increasing 9.3% year-on-year.
Some candidates have already made public statements. One of them is Hungary's MOL, widely regarded as one of the most motivated participants due to its need for crude oil and access to sea. Hungarian prime minister Viktor Orban confirmed just before Christmas that MOL was one of seven bidders. The key point in his statement was emphasizing that MOL is the only EU-based bidder, which could be seen as a strategic move to position itself as the most acceptable buyer for Russia, the U.S., the EU, and Bulgarian politicians with influence over regulatory bodies like the Commission for Protection of Competition, which will oversee the transaction. MOL remains on the shortlist of prospective buyers.
Another shortlisted contender is Kazakhstan's KazMunayGas, the owner of Romania's Rompetrol. Bloomberg recently reported that KazMunayGas had made a 1 billion dollar offer, backed by Swiss commodities trader Vitol. Since the start of the war in Ukraine, Kazakhstan has increased its presence in the European market, providing an alternative to Russian oil. One of KazMunayGas's strengths is that its oil is well-suited to the Burgas refinery's specifications. Since early 2024 Lukoil completely ceased importing Russian crude for the Bulgarian refinery and switched to alternative grades. A part of the refinery's current supply comes from Kazakhstan, shipped via the Russian Black Sea port of Novorossiysk, while another portion is Arabian crude. However, indications suggest that KazMunayGas is unlikely to make it to the final shortlist.
More candidates
Vitol has also submitted a bid independently but it is unlikely to advance further. Vitol previously competed for Lukoil's ISAB refinery in Sicily, backing American fund Crossbridge Partners, which was ultimately beaten in the final stage by Cypriot investment firm G.O.I. Energy, supported by another major commodities trader - Trafigura.
There are also two Turkish contenders: Cengiz (a conglomerate with interests in construction and energy) and Oyak (a pension fund originally established to serve the military but now one of Turkey's largest industrial groups). Among them, Cengiz appears to have stronger positions and a better chance of moving forward in the negotiations, according to industry sources.
The list would not be complete without unofficial reports suggesting that an American fund is also in the race.
There has been no public disclosure from the Russian side regarding the progress of negotiations. However, a final decision is expected this year.
The latest sanctions imposed on the Russian energy sector by Joe Biden's administration just before the inauguration of the new U.S. President Donald Trump caught Lukoil at a critical moment in the process of selling off its Bulgarian assets. The procedure began at the end of 2023, with many candidates becoming clearer by early November last year. The process is now in the phase of negotiations with the strongest bidders and the final outcome is expected soon.
Lukoil's business in Bulgaria includes oil refinery Lukoil Neftochim Burgas, the largest company in the country with revenues of 8.6 billion levs (4.3 billion euro) and a profit of 203.6 million levs for 2023. The second-largest is fuel distributor Lukoil Bulgaria, which also reported a high profit of 128 million levs and revenues of 6.3 billion levs for 2023. The company operates wholesale storage facilities and a retail network of over 220 locations. Lukoil's business also includes two smaller companies - Lukoil Bulgaria Bunker and Lukoil Aviation Bulgaria.
