Lukoil's ISAB refinery in doubt after Vitol-backed bid rejected
Quantum Commodity Intelligence - The future of Lukoil's Italian refinery is in doubt after the Russian company rejected a buyout from US private equity backed by Vitol, just weeks before EU sanctions strip it of its primary crude supply.
Russia's Lukoil turned down an offer from US private equity group Crossbridge Energy late last week, according to reports in the Financial Times, and could make operating the 355,000 bpd ISAB refinery in Sicily impossible after sanctions next month.
Lukoil cited concerns over the group's ability to finance the deal, despite being backed by trading house Vitol, which positioned itself as a new source of crude after EU sanctions next month.
Lukoil is unable to source crude from alternative suppliers because of financing and credit issues since Russia's invasion of Ukraine, and will no longer have access to Russian oil – from 5 December when sanctions start.
Although not strictly sanctioned itself, Lukoil has struggled to secure financing or credit for continuing operations.
The Italian government provided the company with a "comfort letter" last month in the hope it would help Lukoil secure financing, offering assurances to possible lenders from the country's Financial Security Committee.
It raises the possibility of nationalisation, with the Italian government keen to secure the future of a refinery that makes up around 20% of the country's installed capacity .
Geared towards middle-distillate production, the Sicilian plant is also a major supplier of gasoline for the Italian market, in addition to vacuum gasoil (VGO) and fuel oil in the Mediterranean.
A move to nationalise the refinery would be similar to actions in Germany, where the federal government took over the assets of Rosneft Deutschland in September to secure the future of the Schwedt refinery in the east of the country that relied almost exclusively on Russian oil via the Druzhba pipeline.
The government plans to "scrutinise" any potential deal, minister Also Urso told Italian media over the weekend, ensuring any deal secured the "continuity of production and employment levels."
