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Lukoil resumes talks with US buyout group to sell Italian refinery

A US private equity group has resumed talks to buy Italy’s largest petroleum refinery from Russia’s Lukoil, although any deal will require the backing of Italy’s new nationalist government, people briefed on the matter told the Financial Times.

Crossbridge Energy Partners is negotiating an agreement with Lukoil that would value Sicily-based ISAB refinery at €1bn-€1.5bn, the people said. Global commodity trader Vitol would help to finance a deal, they added.

Talks between the US group and Lukoil began earlier this year and accelerated at the end of the summer when Crossbridge executives carried out 12 days of due diligence at the plant in the Sicilian town of Priolo. But discussions came to a halt at the end of October.

Lukoil is pushing to get a deal done before EU sanctions targeting Russian seaborne oil exports come into full effect next Monday. Italy’s government contends that any deal will require extra time to settle, and it is putting a priority on getting banks to provide the refinery with operating funds, officials said.

Vitol would receive a supply and offtake agreement as part of the financing deal, said the people briefed on the talks, which would make it the key provider of crude for the refinery and marketer of the fuels it produces. Vitol declined to comment.

The commodities trading house Trafigura has also held talks with Lukoil about a potential deal in case negotiations with Crossbridge fall apart, people briefed on the matter said. Trafigura declined to comment.

Any acquirer picked by Lukoil would need to obtain the backing of Giorgia Meloni’s new rightwing government, said people briefed about the matter.

Italy is planning to buy a minority stake in the Switzerland-based company that Lukoil uses to control the refinery through so-called “golden power” rule, which enables Rome to intervene when there is a perceived threat to an asset in a strategically important sector, such as energy.

Meloni’s government wants reassurances that any new buyer will not cut jobs or restructure the company in a way that harms one of the poorest parts of the country. The refinery is responsible for producing 22 per cent of Italy’s road fuels.

Italy also wants to ensure that ISAB has sufficient funds for daily operations before takeover talks advance. The refinery is in dire need of almost €1bn, but lenders have refused to reopen credit lines they shut after Russia invaded Ukraine early in the year, said people close to the talks between the banks and Lukoil.

Banks have hesitated because they fear US fines for providing funding to a Russian-owned entity, the people said. Italian officials told representatives of UniCredit, Intesa Sanpaolo, Monte dei Paschi di Siena and Banca Popolare di Milano at a meeting this week that they would seek assurances from US authorities that the lenders would not incur fines for breaching sanctions against Russia now or in the future, said people with knowledge of the talks.

Economic development minister Adolfo Urso said Italy would come up with a solution for the Lukoil refinery by mid-December. “The Priolo plant is a strategic asset for our productive system and for our chemical sector particularly, therefore this is a matter of national interest,” Urso said in November.

Urso also said nationalisation was an option, but government officials said it was unlikely because Rome would have to stump up more than €1bn and become involved in the plant’s operations. The “golden power” option would give Italy an opportunity to acquire a minority stake and control the plant.

The Priolo refinery employs more than 1,000 people and indirectly supports thousands of jobs in satellite activities in the area. Crossbridge is ready to commit to “zero cuts”, said a person with direct knowledge of negotiations.

The Italian treasury declined to comment. The ministry for economic development could not be reached for comment.

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