Lukoil considers sale of Bulgarian refinery

Russian oil company Lukoil is considering all possible options for the future of its Bulgarian business, including the sale of the Balkans’ largest refinery, Neftochim Burgas, and its vast network of petrol stations and oil depots in the country, the Russian company announced on Tuesday.

With 220 gas stations and nine oil bases in Bulgaria, Lukoil currently holds a dominant position in producing and storing petroleum fuels as the region’s key jet fuel supplier.

“Given the significant change in the conditions for functioning, with the help of international consultants, various options will be analysed, including the sale of the business,” it said.

According to its own estimates, Lukoil has been investing in Bulgaria for more than 20 years, with more than $3.4 billion going into its Burgas refinery, which it says has become “one of the most environmentally friendly and high-tech refineries in Europe” . Meanwhile, the influential Bulgarian think tank Center for the Study of Democracy estimates that the Russian company generated $3 billion in excess profits from its Bulgarian business alone.

Regarding such profits being taxed, Lukoil was long criticised for not paying taxes because it artificially kept the refinery at a loss. Still, following the EU embargo on Russian oil for which Bulgaria received a derogation, it began paying its dues.

According to unofficial information obtained by Euractiv, several entities are interested in buying up Lukoil’s Bulgarian business. While interest comes from two US-based investment funds and two smaller oil companies, the most interested is the controversial state-owned Azerbaijani oil company, SOCAR.

At the same time, there is currently no evidence of a declared interest from a strategic Western investor in the Bulgarian oil sector, which is key for the region of South-Eastern Europe which has always been dominated by Russian interests.

Lukoil commented that revising the strategy for the Bulgarian market is a consequence of “the adoption of discriminatory laws and other unfair, biased political decisions towards the refinery, which has nothing to do with the civilised regulation of big business.”

“The artificially fanned political storm surrounding the enterprise of a large international trade structure, against which the European Union and the USA have imposed no sanctions, and which fulfils all its obligations to the state and its workers, harms the business of the Lukoil company, the investment climate in Bulgaria, inexorably destroys the image of the Republic in the eyes of world business, negatively affects the revenues in the state budget”, the company added.

In the Bulgarian parliament, lawmakers have already begun discussing a ban on Russian oil imports, with one proposal suggesting that a ban should be imposed no earlier than 1 March 2024 and no later than 15 March 2024.

According to Finance Minister Asen Vassilev, removing the exemption in favour of a total ban should not affect the Bulgarian market, as there is no reason to raise fuel prices in the country at this stage.

About two weeks ago, Lukoil Neftochim Burgas warned that the cancellation of the new quotas for the export of petroleum products that cannot be placed on the Bulgarian market from 1 January 2024 is effectively tantamount to the cancellation of the exemption from December 2023.

(Krassen Nikolov | Euractiv.bg)

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