The saga with the only oil refinery in the entire European Union (EU) owned by the Russian company “Lukoil“ – the Bulgarian “Lukoil Neftokhim“, which is also the largest refinery in the country, is about to come to an end.
Despite the international sanctions imposed on Russia due to the war in Ukraine, Lukoil continues to manage the strategically important facility, which plays a key role in energy supplies in the region. The main owner of the enterprise is the Swiss-registered company Litasco.
The Russian company itself announced at the end of 2023 that “due to significant changes in operating conditions“ the “Lukoil“ refinery in Bulgaria could be put up for sale. The fact is that since March 2024, Bulgaria has stopped buying oil from Russia, which until recently provided up to 90% of the country's energy supplies. In October 2024, the upcoming sale of the asset was announced by the then Bulgarian Minister of Finance, Assen Vassilev.
Who has claims to the “Lukoil“ refinery in Bulgaria?
According to a source from the PP-DB coalition, which actively insisted on establishing state control over the company, Russia is obviously interested in selling the asset exclusively to “its“ investors. For this reason, major players such as Shell or TotalEnergies are not mentioned among the possible candidates for “Lukoil Neftochim“.
It is known for certain that the Hungarian group MOL is a candidate for “Lukoil Neftochim“. In December, Hungarian Prime Minister Viktor Orbán and Foreign Minister Peter Szijjarto visited Bulgaria. Orbán himself said that MOL would try to acquire the asset. According to Bulgarian experts, MOL is the favorite among the candidates. However, almost nothing is known about the content of its offer.
Meanwhile, another contender has appeared on the scene: In early January, the Kazakh company “KazMunayGas“ announced its intention to buy “Lukoil Neftokhim“. The company explained its interest by wanting to expand its presence on the international energy market. It already owns two refineries in Romania - Vega and Petromidia.
Exchange of assets?
According to Bloomberg, the deal could be worth around $1 billion, with no cash payment likely planned. Experts interviewed by DW believe that the deal could include an exchange of assets. Askar Ismailov, director of the Kazakh company PACE Analytics, believes that “Lukoil“ may receive a stake in the Pavlodar Petrochemical Plant. And financial analyst Rasul Rismambetov suggests that “Lukoil“ will be offered a stake in the petrochemical plant in Atyrau, Kazakhstan.
In addition, the media have already reported on the interest in the refinery from a number of Bulgarian players. Among them are Plamen Bobokov, co-founder of “Prista Oil“, as well as the company “Insa Oil“. According to the “Financial Times“ at the end of 2024, “Lukoil“ had requested Vladimir Putin's approval for the sale of the asset of the Oryx Global consortium to the Qatari businessman Ghanim bin Saad Al Saad and the British company DL Hudson. In addition, the Ambassador of Azerbaijan to Bulgaria Huseyn Huseynov announced the interest of the Azerbaijani state company Socar in “Lukoil Neftokhim“.
What could prevent the sale of “Lukoil Neftokhim“?
The Bulgarian state owns the so-called “golden share“ in “Lukoil Neftokhim“, which guarantees it access to certain information about the refinery's operations, but not the right to veto decisions on changes in ownership. In January 2023, the Bulgarian parliament amended the law so that - at least in theory - the state could take control of the company in the event of a threat to national security, public order and the supply of critical resources - by introducing a temporary management mechanism. Regarding “Lukoil Neftokhim“ however, the implementation of such a mechanism is not currently under discussion.
“The government respects private property - from this point of view, the Bulgarian state cannot make decisions regarding the change of ownership of the plant. However, given the importance of the plant for the country's national and energy security, we are closely monitoring the process“, said Acting Minister of Energy Vladimir Malinov in December.
“Lukoil“ previously operated in many European countries, although this was never a priority for the company. In 2014, after Russia annexed Crimea, it became clear that this part of “Lukoil“s business had no future.
“Lukoil“ bids farewell to Europe
In 2014, “Lukoil“ sold 240 gas stations and six oil depots in Ukraine, as well as many gas stations in the Baltic states, the Czech Republic, Slovakia and Hungary. In 2017, “Lukoil“ shareholder Vagit Alekperov explained the sale of assets in neighboring countries by “serious anti-Russian sentiments“.
However, until the beginning of Russia's full-scale invasion of Ukraine, “Lukoil“ still had some business in the EU. This included, for example, the large ISAB refinery in Sicily, which produced more than 20% of Italy's gasoline. However, the ban on seaborne oil supplies from Russia imposed in December 2022 paralyzed the company's activities. The authorities discussed the possibility of its nationalization, but in the end “Lukoil“ found a buyer - Cyprus-based G.O.I. Energy. Italian media suspected that this company might be connected to Russia, but this could never be proven.
„Lukoil“ still has assets in Romania and Moldova. Rumors about their sale periodically appear, but so far they have not been confirmed. Finally, along with the refinery in Burgas, the Russian company continues to own a large network of gas stations in Bulgaria. According to „Bloomberg“ „Lukoil“ would like to sell it for $3.3 billion, which is more than three times the amount it could get for „Lukoil Neftokhim“.