Russia’s Lukoil has agreed to sell its Sicilian refinery to an Israeli-backed private equity fund that has partnered with commodities trader Trafigura in a last-minute bid that gazumped an offer from US-based Crossbridge Energy Partners and oil trader Vitol.
The deal, expected to close by the end of March, will allow the plant to avoid nationalisation or closure after EU sanctions cut it off from Russian oil supplies in December.
Two people close to the transaction said GOI Energy would pay Lukoil — the largest non-state owned Russian oil company — about €1.5bn to acquire the facility, which can process roughly 355,000 barrels of oil a day.
Trafigura, one of the largest commodity traders, will not take a direct stake in the plant but will help provide it with working capital and crude oil, while marketing the refined fuels it produces under an exclusive supply and offtake agreement.
The deal is significant for the Italian government that had feared the closure of one of the largest industrial sites in western Europe after banks turned away from Lukoil following Russia’s invasion of Ukraine.
People close to Italian economic development minister Adolfo Urso said the acquisition would be subject to “the usual checks in terms of antitrust and environmental rules as well as the maintenance of production and employment levels”.
The plant had initially continued operations by relying solely on Russian oil supplies from Lukoil, but since December EU sanctions have banned its seaborne import from Russia.
The Italian government also passed an emergency decree last month to make sure it had the powers to secure the plant’s operations, including through a temporary nationalisation if Lukoil failed to agree a sale.
GOI is an arm of Argus New Energy Group, a private equity fund primarily backed by Israeli investors, according to people familiar with its operations.
Its chief executive is Michael Bobrov, who used to run Trafigura’s operations in Israel. Bobrov also has a stake in the Bazan Group, which operates Israel’s largest oil refinery, through another vehicle.
The deal will help boost trading volumes for Trafigura after it stopped marketing crude for Rosneft, Russia’s state-backed oil champion, following the Ukraine invasion.
Crossbridge had been in on-off talks with Lukoil for several months. Late last year it was close to reaching an agreement to buy the refinery as part of a proposal backed by Vitol, one of Trafigura’s main rivals.
People with direct knowledge of the talks said Rome and local trade unions were concerned, however, that a sale to Crossbridge could have led to job cuts. A person close to Crossbridge denied it planned to cut the number of employees, expressing surprise that the bid was rejected after months of talks.
An Italian official said the choice had come down to the best monetary offer. Crossbridge had offered about $1bn, according to a person with direct knowledge.
The Sicilian plant employs more than 1,000 people and indirectly supports about 2,000 jobs in one of the poorest areas of Italy.
Ben Luckock, co-head of oil trading at Trafigura, said the structure of the deal was a “sensible model” for the industry and indicated the commodity house would be open to replicating it in the future.
“It brings together a group of investors that want direct exposure to refining with a logistics expert in Trafigura that can provide support,” Luckock said.
Refining margins in Europe have been strong over the past year, boosted by demand recovering from the pandemic and the loss of some refined oil sales from Russia after the invasion. From February, the EU will also ban most refined fuels being imported from Russia.
In recent years, however, some European refineries have closed with ageing plants struggling to compete against larger, more modern facilities in Asia. Questions also remain over demand given the EU’s push to cut emissions.
