Klesch decision on Murphy UK refinery expected this week-sources

LONDON, June 26 Thu Jun 26, 2014 7:11am EDT

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LONDON, June 26 (Reuters) - Oil entrepreneur Gary Klesch is in the final stages of exclusive talks with Murphy Oil to buy its Milford Haven refinery in Wales and a decision on a deal will be made this week, sources close to the negotiations said on Thursday.

One source said an announcement on the future of the 135,000 barrel-per-day plant would be made by early next week at the latest.

Swiss-based Klesch Group did not immediately respond to a request for comment. A Murphy spokesman declined to comment.

If a deal is not done, it is expected that Murphy will move to close the plant, putting most of its some 500 employees out of work.

The plant is currently not buying crude oil, but recycling oil products to keep it operational.

Murphy started a 45-day consultation period in April with staff and unions, which it has left open since it elapsed in May.

One source familiar with the negotiations said that there was roughly a 50 percent likelihood of a deal to keep the plant open being done.

He said that any deal would likely value the plant at close to zero, but any sum paid for the plant would include oil inventories.

Tom McKinlay, head of Murphy's Oil UK operations, stepped aside to pursue the acquisition of the company's ailing Milford Haven refinery and retail business, it emerged May.

One of the sources said that it was likely that McKinlay would still be involved in the plant should the deal go through, though it was unclear if there would be any element of management ownership under the new structure.

Refineries in Europe are being squeezed by high crude prices and low refining margins due to weak demand for fuel.

India's Essar Group plans to sell the Stanlow refinery in Britain, three sources familiar with the matter said, although the UK subsidiary of the company has since denied that the plant is up for sale.

Last year, PetroIneos was on the brink of closing its Grangemouth plant in Scotland after a bitter industrial dispute.

It survived after workers agreed to cuts in terms and conditions, the British government made a pledge to provide a loan guarantee, and the Scottish government promised a grant. (Reporting by Simon Falush; editing by Jason Neely)

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