No. 3, 2012

Representative of the President of LUKOIL in the North-West Federal District of the Russian Federation


LUKOIL-Severo-Zapadnefteprodukt: leader of the petroleum product market

THOSE WHO ARE ACCUSTOMED TO LUKOIL not so long ago starting up one or two gasoline filling stations a month in the region (especially in St. Petersburg and the Leningrad Region), today sometimes ask: are you not going to develop your network at all? This is obviously an outsider's question. Since the beginning of the second decade of this century, we have, indeed, cut back construction several fold - in its development, the Company has reorientated itself on making efficient use of assets and raising the quality of services. At the same time, we are continuing to start up new and renovate existing facilities. Otherwise, one could not compete, especially since the competition is hotting up: over the last 3-4 years, all the leading vertically-integrated oil companies of Russia have established themselves here. And, in addition, in St. Petersburg - foreign oil traders, too.


Over the last five years, the total number of gasoline filling stations of various companies has increased in St. Petersburg more than 1.5-fold, whereas fuel consumption has gone up only 20% (owing to the rise in the number of vehicles). Yet it is indicative that car drivers now have a wider choice and are giving preference more and more to LUKOIL fuel. In 2010, one in five drivers in St. Petersburg and the Leningrad Region filled up their cars at our gasoline filling stations, whereas in 2012 it is already almost one in four.

The assets of LUKOIL-Severo-Zapadnefteprodukt today include more than 300 gasoline filling stations. Last year, within the scope of the investment program, we built four filling stations in St. Petersburg, two in the Leningrad Region and one in the Pskov Region. The St. Petersburg water-shore fuel filling station for filling up cars (the year round) and small boats during the navigation season is a landmark not only for LUKOIL-Severo-Zapadnefteprodukt, but also for the Company as a whole. This is the second such fuel filling station in Russia. The first was also built on the banks of the Neva in the city center two years before.

We focus particularly on making all the filling stations in the region comply with the corporate style. After all, during the period of rapid development of the network (in the middle years of the first decade of this century), entire networks were acquired from local oil-traders and today we are renovating them in a planned order of priority. This often means rebuilding them from the ground up.

Last year, we adopted the reconstruction program for up to 2017. Within its scope, during the last year, seven filling stations were renovated in different regions, from the Kaliningrad Region to the Republic of Komi, the highest number being in the Archangelsk Region - 3 gasoline filling stations. In all, in this region, 14 gasoline filling stations will be modernized by the end of the program term.

Practice shows that, on average, there is a fifty percent increase in the amount of fuel sold at reconstructed stations. After all, modern cafes and stores are built here and additional services introduced.


Last year, a whole complex of measures was developed to increase sales of petroleum products - from a change (on agreement with the police) in the traffic flows in the area of the filling stations to more beneficial siting of billboards and information signs on the location of filling stations. For instance, additional signs were erected to guide to 7 gasoline filling stations located away from the main traffic flows: as a result, there was a 3.5-fold increase in the amount of fuel sold.

The measures designed to increase the economic efficiency of the filling stations include one which is especially characteristic of St. Petersburg. Back in the early 2000s, we were among the first at LUKOIL to start building automatic filling stations - for such a huge city as St. Petersburg, where land is expensive, this is a realistic way of expanding the network of filling stations. And now, since last year, we have been creating unified complexes of closely located fixed and automatic filling stations (where no service personnel are required).

The purpose of creating unified filling complexes is to reduce the staff numbers at such stations (meaning to reduce operating costs) and, at the same time, retain the possibility, if necessary, of providing customers with prompt assistance by personnel from nearby manned filling stations.

We are also cutting operating costs by buying out previously leased land plots on which filling stations stand. We are connecting existing stations to a constant electricity supply. Since this process involves cutting through a lot of red tape, during the period of active construction, we began operating some stations using diesel generators. This year, we intend to introduce corporate automatic control system at filling stations in St. Petersburg and the Leningrad Region and to launch a program for installing automatic payment terminals.


The last two or three years, as practice and selective social surveys show, filling station customers increasingly visit filling stations not only to fill up their cars but also to buy things and have a snack. Moreover, they are becoming more and more demanding with respect to the diversity and quality of the goods and services. This sphere of work - client-orientated approach - as it is called in the Company's program, has been the priority for LUKOIL-Severo-Zapadnefteprodukt several years now.

In general, in terms of the share of associated goods sales at filling stations, in 2009‒2010, LUKOIL-Severo-Zapadneftepro-dukt had the highest annual indicator among enterprises of the petroleum product supply sector in Russia (from 5.1 to 5.6%). According to the 2011 results, however, the winner's crown has now passed to our colleagues at LUKOIL-Tsentrnefteprodukt (Moscow, Mos-cow Region and central parts of Russia). LUKOIL-Severo-Zapadnefteprodukt is in second place.

At the same time, we are constantly increasing the number of cafes at filling stations and raise the effectiveness of the retail space use. At the beginning of this year, there were 110 catering outlets at the Company's filling stations: 7 cafes with a full food preparation cycle, 31 where finished food is heated up, 57 small cafes and 15 cafes that are leased out. Over the year, sales revenues for the output of the Company rose by 35 %.

This year, LUKOIL-Severo-Zapadnefte-produkt will continue the practice of leasing out cafe premises. Let me note that the services of cafes leased out are not taken into account in the indicator "share of associated goods sales at filling stations." But this is just a matter of financial reporting. In the given case, it is important how satisfied LUKOIL customers are.

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