Shah Deniz produced around 28bn cubic metres (bcm) of gas and 4mn tonnes of condensate last year, or 5.6 bcm and 0.8mn tonnes net to Lukoil respectively. It is a key source of gas supply for the European market, delivering volumes to there via the Southern Gas Corridor network of pipelines. Planning is underway for a third development phase, which would raise output even further.

The current partners in Shah Deniz may be able to use their pre-emptive rights to Lukoil’s stake in the event of a sale deal. That means that whatever price Lukoil negotiated with another party, those partners would have to match.

The most obvious candidates to take Lukoil’s interest would be BP, Shah Deniz’s operator, and SOCAR, Azerbaijan’s national oil company and another of the field’s partners. Neither firm has expressed interest in the asset yet, but BP is eager to expand further in Azerbaijan, where it is already the country’s biggest foreign investor. It signed agreements earlier this year to take 35% interests in the Karabakh field and the prospective Ashrafi-Dan-Ulduzu-Aypara structures, also in the Azeri Caspian. SOCAR’s rationale would be to take greater control over strategic national asset, and a larger share of revenues for the state.

Bulgaria: Lukoil's primary asset in Bulgaria is the Neftochim Burgas refinery, the largest oil refinery in the Balkans with a capacity of up to 9.5mn tonnes per year (190,000 barrels per day). Lukoil has owned the plant since 1999, and its local distribution unit with a network of fuel stations historically held a near-monopoly on the Bulgarian fuel market.

The Bulgarian parliament adopted legal changes to place the refinery under state control/trusteeship to ensure its continued operations despite sanctions. President Rumen Radev vetoed the changes on November 12, but that veto was subsequently overturned by parliament the following day. 

In doing so, Bulgaria is following the example of Germany, which in 2022 placed Rosneft’s refining interests under a state trusteeship. The government in Sofia could move to nationalise the assets at a later point, although it has not suggested doing so at this stage. 

Iraq: Lukoil's most valuable single foreign asset is its 75% operating stake in the West Qurna-2 oil field in southern Iraq. This field is one of the world's largest undeveloped reserves, with 13bn barrels recoverable. Lukoil began production in 2014, and the field's output has recently been around 400,000-480,000 bpd, representing nearly 10% of Iraq's total oil output. The project has generated substantial annual revenue for Lukoil, providing a crucial source of foreign income.

US sanctions have already disrupted operations, with Lukoil declaring force majeure at the field on November 11, saying the restrictions had led to banks and counterparties blocking payments. The Iraqi government responded by halting payments to Lukoil and canceling millions of barrels of crude shipments allocated as in-kind payment for Lukoil's equity. Lukoil has reportedly set a six-month deadline to resolve the crisis before potentially withdrawing completely.

The crisis creates significant strain on the Iraqi government, which relies heavily on foreign operators for production, and the idling of West Qurna-2 results in billions of dollars in lost annual revenue for Iraq. The country is exploring mechanisms to stabilise production or find a non-sanctioned intermediary to take over operations. The asset's sale is highly complicated by the ongoing force majeure and the necessity of Iraqi government approval.

Kazakhstan: Lukoil has significant minority stakes in some of Kazakhstan's largest and most strategic oil and gas projects. Its key upstream interests include a 13.5% interest in the Karachaganak field, a 5% interest in the Tengiz oilfield, as well as 12.5% of the Caspian Pipeline Consortium (CPC) that exports the majority of Kazakhstan’s oil, via Russia to the Black Sea. Lukoil also has interests in the Kalamkas-Khazar and Al-Farabi exploration projects in the Kazakh zone of the Caspian Sea.

Amid Lukoil's push to sell its international assets, Kazakhstan’s national oil company KazMunaiGaz is viewed as the most logical buyer for the domestic stakes to gain greater control over strategic national resources. The Kazakh government, however, has stated that no definitive decisions have been made and that negotiations are complex, as they involve major international partners like Chevron, ExxonMobil, Eni, and Shell, who also have pre-emptive rights that could complicate or stall any transfer of ownership. Chevron is considering options to buy some of Lukoil’s international assets, Reuters reported on November 17 citing sources, with its holdings in Kazakhstan seen as the most likely target. 

The share in Tengiz is particularly valuable, given the field completed a $48bn expansion programme earlier this year, which is set to raise its output by 260,000 bpd to around 1mn bpd. 

Moldova: Lukoil's assets in Moldova primarily focus on downstream operations, consisting of a network of over 100 filling stations and a critical aviation fuel terminal at Chisinau International Airport. While smaller in value than many of its other European assets, the infrastructure is strategically important for the nation’s fuel supply.

The US sanctions threatened to disrupt the supply of jet fuel, prompting the Moldovan government to take decisive action. Lukoil's local subsidiary voluntarily transferred the strategically important fuel terminal at Chisinau airport to the Moldovan government for management under a loan agreement.

The next step for the Moldovan government is to negotiate the purchase of this airport infrastructure from Lukoil. This process, including audit, valuation, and securing a new buyer with the consent of US authorities, is expected to take up to a year. The retail fuel market is considered more diversified and less vulnerable to disruption. The government has stressed that it is pursuing a buyout, not nationalisation, of Lukoil's assets.

Netherlands: Lukoil holds a 45% stake in the Zeeland Refinery in Vlissingen, the Netherlands, a major processing hub in Western Europe. The refinery, which has an annual capacity of approximately 7.5mn tpy (150,000 bpd) of oil, is majority-owned and operated by TotalEnergies (55%). As Lukoil only has a non-operating, minority share, a sale will depend on whether TotalEnergies chooses to use its pre-premptive right. The French major may be the most logical and motivated buyer to secure full control of the facility. The Dutch government, like others in Europe, is focused on ensuring a smooth transition to maintain national energy security and the continued operation of the refinery.

Romania: Lukoil’s presence in Romania is anchored by the Petrotel Ploiești oil refinery. This strategic facility has a processing capacity of around 2.5mn tpy (50,000 bpd). In addition to the refinery, Lukoil owns and operates a network of approximately 320 distribution stations, making it one of the largest in the country.

Like Bulgaria, Romania is exploring avenues to secure the refinery's continued operation in the wake of US sanctions against Lukoil. The Romanian government is working on legislation to ensure full compliance with sanctions while simultaneously guaranteeing the continuity of refining activities and protecting the jobs associated with the refinery and its distribution network. The government has indicated a desire to take control of the company's operations, though nationalisation is considered a last-resort option.

Several parties have expressed formal interest in acquiring the Romanian assets as part of Lukoil's international sell-off. These include the US investment fund Carlyle, which already has Black Sea oil and gas interests in Romania, according to Reuters,  as well as regional energy majors like Hungary's MOL and Greece's Hellenic Petroleum.

Uzbekistan: Lukoil's operations in Uzbekistan are focused on natural gas upstream development through two key production sharing agreements (PSAs): the Kandym-Khauzak-Shady project and the South-West Gissar project. Lukoil has been active in Uzbekistan since 2004, with the cumulative gas production at its projects exceeding 100 bcm. The Kandym Gas Processing Complex, commissioned in 2017, with an annual capacity of 8.1 bcm, is a major component of its operations, converting sulphurous gas into marketable products.

The natural gas produced by Lukoil in Uzbekistan is a vital source of national gas supply. It also sends some supply to China, although Uzbekistan has been scaling down these exports in recent years because of rising gas demand at home. The nature of the PSAs, which involve the Uzbek state-owned energy company, would require government approval for any transfer of Lukoil's interest.

Elsewhere: Lukoil's overseas portfolio extends to smaller exploration and production interests across the globe. In West Africa, the company is an active partner in several deep-water offshore projects in the Gulf of Guinea, holding stakes in the Deepwater Tano/Cape Three Points block in Ghana and the OML-140 offshore block in Nigeria, where its partners include major US and European firms like Chevron.

Moving to the Middle East and North Africa, Lukoil maintains a 25% interest in Eni's Marine XII block in Congo, an Eni-led project now producing LNG and a 10% stake in the major Ghasha gas field in the UAE. Additionally, Lukoil has indicated to the government its plans to sell its holdings in Egypt, which span three upstream concessions, including the WEEM and Meleiha projects. On the other side of the Atlantic, Lukoil holds stakes in multiple offshore and onshore blocks in Mexico in the Gulf of Mexico, notably a 50% operating stake in the Amatitlan onshore block and a 60% stake in the offshore Block 12 alongside Eni.

Shell has reportedly expressed specific interest in acquiring certain components of Lukoil's international portfolio where it can consolidate existing operations or strategically expand its deep-water footprint. Shell is understood to be actively considering bids for Lukoil’s deep-water blocks in Ghana and Nigeria to capture operational synergies in the Gulf of Guinea.