LUKoil ERG Joint Venture Deal in Italy To Close

Vagit Alekperov President of LUKoil said that “The deal for the refinery will be closed on December 1st 2008 LUKoil will pay in cash during the year.” The Russian oil company earlier said that the agreement on the JV to operate the ISAB refinery complex in Priolo, Sicily, was signed between Alekperov and ERG CEO Alessandro Garrone in Rome on June 23rd 2008. Under the deal, LUKoil will acquire a 49% stake in the JV for EUR 1.35 billion, excluding inventory. ERG will retain 51%. The transaction provides LUKoil with an option to increase its stake in the future.

Alekperov said earlier that “The establishment of a refining joint venture in Italy is a cornerstone of LUKoil’s growth strategy in the area of developing its downstream operations in Western Europe. LUKoil’s overall refining capacities will increase by 13% and overseas refining capacities will increase by 60%. The refinery’s advantageous location and an opportunity to process Russian crude make this project very attractive.”

According to Lukoil the ISAB refinery complex is one of the largest refineries in the region and is well positioned to meet the growing middle distillate demand in Europe. The refinery includes two sites which are united by a pipeline system and integrated in a single refining unit with a total annual refining capacity of 16 million tons.

The Russian oil company said that each partner will procure its share of crude and market its share of products in accordance with its JV equity stake. The ISAB refinery has the flexibility to process crude such as Urals, and LUKOIL intends to fully integrate its share of the refinery into its supply chain.

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