December 01, 2022 [Reuters] – Italy is working with banks to unlock financing for a Lukoil-owned refinery (LKOH.MM) in Sicily while also considering direct state intervention to keep the Russian energy giant’s plant running, Industry Minister Adolfo Urso said on Wednesday.
The survival of Lukoil’s ISAB plant in southern Italy is under threat due to a European embargo on seaborne Russian oil coming into effect on Dec. 5. ISAB has been forced to rely solely on Russian oil after banks stopped financing it and providing guarantees needed to buy oil from elsewhere.
Prime Minister Giorgia Meloni’s government wants to salvage the refinery, which accounts for a fifth of Italy’s refining capacity and employs about 1,000 workers in an economically disadvantaged area.
Speaking to reporters in parliament, Urso said the government was no longer considering seeking a temporary waiver from the European Union.
“Two options are still on the table,” he added, referring to government efforts to secure bank financing for ISAB or possible direct state support.
ISAB’s creditor banks have been wary of dealing with a Russian entity because Lukoil is affected by international sanctions in the United States, though not in Europe.
Asking not to be named, three sources close to the matter told Reuters the government was trying to obtain a so-called ‘comfort letter’ from U.S. authorities with reassurances in writing that the banks would not risk future fines.
So far, however, there has been no positive response to Italy’s request, one of the sources said.
The Italian foreign ministry declined to comment on the comfort letter. The U.S. embassy in Rome and Lukoil did not immediately respond to requests for comment.
The banks have also requested guarantees of up to 100% on the loans from state-owned credit export agency SACE – which normally provides an 80% guarantee on similar transactions.
The opposition Democratic Party presented to parliament a measure allowing Rome to place ISAB under state trusteeship, the same path followed by Germany when in September it took control of a refinery owned by Russian oil firm Rosneft (ROSN.MM).
A meeting with key government officials, SACE and the lenders is expected to take place on Wednesday.
The cabinet on Thursday will also discuss steps aimed at helping the ISAB plant, one of the sources said.
A change of owner would solve ISAB’s problems and a number of possible buyers, including U.S. investment platform Crossbridge Energy Partners, are currently looking at the asset.
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