The ISAB refinery owned by the Russian oil producer Lukoil declines the purchase offer of Crossbridge Energy Partners. The Russian oil producer doubts the ability of the U.S. private equity firm to pay for the deal. This decision could put thousands of jobs at risk and bankrupt the refinery.
European embargo
Lukoil’s ISAB refinery in Sicily represents about 20% of Italian refining capacity. However, the international sanctions against Russia do not affect the Russian oil producer. For this reason, ISAB’s suppliers and creditor banks are wary of dealing with a Russian entity.
European Union leaders agreed at the end of May to a gradual embargo on Russian crude. This ban on sea imports could have a serious impact on the refinery. Recently, new sanctions against Russia are being announced and will come into effect next month.
The Italian government is trying to gain time to conclude the sale of the refinery. He also works to find ways to keep the business going. It is an important source of employment in the region, employing approximately 1,000 people.
Lack of funding
Lukoil’s ISAB refinery buys 30 to 40% of its raw materials from Russia. The rest of its supply comes from international markets. Since the invasion of Ukraine, ISAB has depended solely on Russian oil because creditor banks have stopped financing it.
They also cease to provide the guarantees needed to purchase oil from alternative suppliers. The Financial Times adds that the ISAB refinery is asking a number of banks for financing of around €700 million. However, banks are reluctant to take this risk.
The newspaper states that the state-owned lender SACE may support part of the loan to the ISAB refinery. However, the Italian Minister of Ecological Transition, must intervene in the debate. He says that nationalization is among the possible options for Lukoil’s Sicily-based refinery.
