LUKOIL's Bulgarian Refinery May Shut Down Due To Exporting Concerns

Reuters, November 21, 2022

LUKOIL Neftochim Burgas, Bulgaria's only oil refinery, may have to shut down if the government does not follow through on plans to allow the Russian-owned business to continue exporting, Chief Executive Ilshat Sharafutdinov said on Monday.

The European Union has agreed to a ban on Russian crude oil imports as part of its sanctions against Russia for its invasion of Ukraine in February. The ban takes effect next month, but Bulgaria has been given an exemption and is allowed to import Russian crude until the end of 2024.

The Bulgarian caretaker government plans to allow the LUKOIL Neftochim refinery to continue importing Russian crude once the ban takes effect and give it permission to export its output. The previous government wanted to limit sales of the refinery's fuels to just the Bulgarian market.

LUKOIL Neftochim, which has switched to only Russian crude since the spring, expects to process a record high 7.1 million tonnes of crude oil this year, Sharafutdinov said. He said the refinery exports about 50% of its fuels and other end-products.

"The refinery cannot work if the exports are curtailed," Sharafutdinov told a joint news conference with Bulgarian deputy Prime Minister in charge of economic policy, Hristo Alexiev.

After talks with the Bulgarian government, the refinery, situated in the Black Sea city of Burgas, has agreed to change its business model and keep the profits from its operations in Bulgaria, which will seriously increase the taxes it pays, Alexiev said.

The government has already proposed to the parliament a temporary windfall tax of 33% on profits of oil, gas and coal companies for this and next year.

Alexiev said Bulgaria expects to collect around 100 million levs in taxes from LUKOIL's operations for 2022, which should jump to 700 million levs in 2023.

Sharafutdinov said LUKOIL Neftochim could pay such taxes next year if the market conditions remain the same and it could work on full capacity, processing Urals crude and exporting its output.

(Reporting by Tsvetelia Tsolova; Editing by Mark Potter and Mark Porter)

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