Russia’s Lukoil Agrees to Sell Italian Refinery to Consortium

Russia's Lukoil (LKOH.MM) has sold its Italian refinery to a consortium of Western private equity and trading firms in the first major asset sale since Moscow's invasion of Ukraine, the companies said on Monday.

Since its inception following the collapse of the Soviet Union, Lukoil had been one of the most active western asset-buyers of Russian companies, but these overseas assets became problematic after the West imposed broad sanctions on Russia in response to Moscow's invasion of Ukraine. 

The sale of the plant to a consortium, led by Cypriot private equity firm G.O.I. Energy and backed by Geneva-based Trafigura, caps months of talks and can be viewed as a partial success given disorderly processes elsewhere as Moscow and the West confiscate each other's assets.

Global sanctions have frozen around $300 billion, almost half of what Russia had in its gold and forex reserves, though Lukoil has not been directly targeted by Western sanctions.

The sale process is in contrast to Germany's confiscation of Rosneft's Schwedt refinery and Gazprom Germania, or Russia's takeover of Sakhalin 1 from Exxon Mobil (XOM.N).

G.O.I. Energy is run by Michael Bobrov, who is also CEO of Israeli firm Green Oil that holds a major stake in Israel's biggest refiner Bazan Group.

Trafigura will provide some financing and handle crude oil supplies and refined products output, the companies said. Trafigura will not hold a stake in the plant.

The deal marks an expansion into the refining sector for Trafigura that concluded a similar deal with Prax in 2021 for a refinery in Britain. Trafigura also holds a 3% stake in Italian refiner Saras, an indirect stake in India's major Nayara refinery and runs two small refineries via its subsidiary Puma Energy.

The ISAB plant in Sicily refines 320,000 barrels per day of crude, accounting for a fifth of Italy's refining capacity, and directly employs about 1,000 people in an economically depressed area in the country's southernmost region.

In a statement, the companies said the deal was expected to close in March. The companies did not provide a value for the deal. Earlier price discussions with other bidders were just under 1.5 billion euro ($1.61 billion).

The agreement to sell the plant needs approval from Italy's government, which under what are known as golden power regulations, reserves the right to block or impose conditions on deals involving companies deemed of strategic importance.

Reporting by Julia Payne in London and Giuseppe Fonte in Rome; editing by David Evans and Barbara Lewis