The PJSC Lukoil Oil Company (Russian: Лукойл, tr. Lukoyl, IPA: [ˈluːkɔɪl] stylized as LUKOIL or ЛУКОЙЛ in Cyrillic script) is a Russian multinational energy corporation headquartered in Moscow, specializing in the business of extraction, production, transport, and sale of petroleum, natural gas, petroleum products, and electricity. It was formed in 1991 when three state-run, western Siberian companies named after the respective town in Khanty–Mansi Autonomous Okrug that each was based in, Langepasneftegaz, Urayneftegaz, and Kogalymneftegaz, merged. Its name is the combination of the acronym LUK (initials of the oil-producing cities of Langepas, Uray, Kogalym) and the English word “oil”.[2][3]
Lukoil is the second largest company in Russia after Gazprom, and the country’s largest non-state enterprise in terms of revenue, with ₽4,744 billion in 2018.[4][5] In the 2020 Forbes Global 2000, Lukoil was ranked as the 99th-largest public company in the world. Internationally, it is one of the largest global producers of crude oil. In 2019, the company produced 87.488 million metric tons of oil (1.639 million barrels per day) and 35.046 billion cubic meters of natural gas.[6][failed verification] As of 2021, the company had operations and subsidiaries in more than 30 countries around the world.[7][needs update]
“Langepas, Uray, and Kogalym” oil (Lukoil) was established by the USSR Council of Ministers Decree No. 18 on November 25, 1991, as a state-owned enterprise. In the new company, three oil production companies, Langepasneftegaz, Uraineftegaz, and Kogalymneftegaz, processing company Permnefteorgsintez, and the Volgograd and Novosibirsk refineries, were merged (the latter soon came under the control of the authorities of Bashkortostan).[8]
The central figure in the company’s founding was the Soviet deputy minister of oil production Vagit Alekperov.[8] He came to believe the only way Russians could compete against western companies was to copy their business model. That meant vertically integrating the three branches of the industry—exploration, refining, and distribution—that were strictly separate under the old Soviet system.[9]
On April 5, 1993, Lukoil transformed itself from a state-owned enterprise to a private open joint-stock company based on Presidential Decree No. 1403 of November 17, 1992.
1990s
In 1994, Lukoil became the first company to begin offering shares of stock on the new Russian Trading System.[8]
In 1995, Lukoil controlled the stakes of nine oil-producing, marketing and service enterprises in Western Siberia, the Urals, and Volgograd Oblast in order to abide by Government Decree No. 861 of September 1, 1995.[10] In the same year, a 5% stake of Lukoil was sold by the state with a minimum excess of the starting price in an auction.[11] In November 1995, Lukoil filed with the U.S. Securities and Exchange Commission to issue American depositary receipts on Western stock markets. This allowed United States investors for the first time, to be able to buy shares in a Russian company.[12]
In 1997, Lukoil signed a contract with the Iraqi Ministry of Oil for the development and production of the second stage of the West Qurna-2 oil field. After Saddam Hussein’s regime was overthrown, the project was suspended and later terminated.[13]
In 1999, Lukoil acquired numerous enterprises such as the Odessa Oil Refinery in Ukraine, the Burgas Oil Refinery in Bulgaria, and KomiTEK.[10]
In 2000, Lukoil acquired the distribution and marketing operations of American oil company Getty Oil. This resulted in the control of a network of gas stations in the United States as well as the first time Lukoil enters the American oil market.[10]
In September 2004, ConocoPhillips purchased a 7.6% stake in Lukoil for about $2 billion. According to some commentators, the sale of this deal was planned before in a personal meeting between Russian President Vladimir Putin and ConocoPhillips’ president and CEO, James Mulva. After the auction, Lukoil and ConocoPhillips announced the creation of a strategic alliance. Later, the American company increased its stake to 20% in Lukoil and sold to the Russian company part of its network of gas stations in the United States and Western Europe. The two oil companies also agreed to jointly develop an oil and gas field in the northern Timan-Pechora area of Russia (Komi Republic) and intended to secure the rights to develop the West Qurna Field in Iraq, one of the country’s largest.[14][15]
Uzbekistan’s deputy prime minister Ergash Shaismatov announced on 30 August 2006 that the Uzbek government and an international consortium consisting of state-run Uzbekneftegaz, Lukoil Overseas, Petronas, Korea National Oil Corporation, and China National Petroleum Corporation signed a production sharing agreement to explore and develop oil and gas fields in the Aral Sea, stating “The Aral Sea is largely unknown, but it holds a lot of promise in terms of finding oil and gas. There is risk of course but we believe in the success of this unique project”.[16] In December 2006, Lukoil announced the acquisition of 376 filling stations in six European countries: Belgium, the Czech Republic, Finland, Hungary, Poland, and Slovakia, from ConocoPhillips.[17]
In 2007, Lukoil established a joint-venture with Gazprom and in 2008, established a joint-venture as well with Italian oil company ERG S.p.A.[10] In 2009, Lukoil and Norwegian oil company Statoil won a tender offer for the development of the West Qurna Field in Iraq. However, in early 2012, Statoil withdrew from the project, resulting in Lukoil consolidating 75% of development of the oil field.[10][13]
2010s
From 2010 to February 2011, ConocoPhillips sold its whole 20% stake in Lukoil due to its difficult financial situation.[18][19]
In September 2012, Lukoil created a shared service centre in the Czech Republic to provide accounting services to its subsidiaries in Belgium, Poland, and Bulgaria.[20] In December 2012, Lukoil bought the Imilor field for ₽50.8 billion in the Khanty-Mansi Autonomous Okrug to explore and develop the hydrocarbon deposits located there.[21]
In February 2013, Lukoil sold the Odessa Oil Refinery to the Ukrainian “East European Fuel and Energy Company” (VETEK). For Lukoil, the oil refinery was unprofitable when production was stopped as early as October 2010 and the refinery finally closed in the summer of 2013.[22] In April 2013, Lukoil agreed to buy Hess Corporation’s Russian unit for $2.05 billion.[23]
In 2014, the company faced a sharp decline in retail sales in Ukraine by 42%, caused by Russian intervention in Ukraine. As a result, the management of Lukoil agreed to sell 100% of its subsidiary Lukoil Ukraine to the Austrian company AMIC Energy Management, which was announced at the end of July 2014.[24][25]
In 2014, Lukoil sold its service stations in the Czech Republic, Slovakia, and Hungary.[26]
In 2015, it sold its service stations in Estonia and Ukraine, and in 2016, it sold its service stations in Latvia, Lithuania, Poland, and Cyprus.[27][28][29]
2020s
In March 2022, Lukoil’s market stock price dropped 95 percent, as a result of international sanctions during the 2022 Russian invasion of Ukraine.[30]
On 21 April 2022, Lukoil issued a statement saying that president Vagit Alekperov had stepped down and resigned from the board of directors after 29 years.[31]
The Norway state-owned oil company Equinor exited the last of their joint ventures in Russia by withdrawing the joint venture with Lukoil and exiting the Kharyaga project on 2 September 2022.[32]