UPDATE 2-Spain prefers other buyer for Repsol-minister

(Adds prime minister, talks)

MADRID, Nov 25 (Reuters) - Spain's Interior Minister said on Tuesday he would prefer a company other than Russia's LUKOIL (LKOH.MM) to buy builder Sacyr Vallehermoso's (SVO.MC) 20 percent stake in oil group Repsol (REP.MC).

"If you ask me if there is another partner for Repsol I would prefer than LUKOIL, I would definitely find one," said Alfredo Perez Rubalcaba, speaking on Spanish radio station Onda Cero.

Asked if he would favour French oil giant Total (TOTF.PA) as a potential partner, Rubalcaba said: "Well maybe, but we would have to look at it."

LUKOIL is in talks to buy Sacyr's 20 percent of Repsol and stakes from other shareholders, according to various sources. Spain's government has said it wants Repsol to remain in Spanish hands but will not interfere in a private operation.

Spanish Prime Minister Jose Luis Rodriguez Zapatero meanwhile firmly denied media reports that state holding company SEPI might acquire Sacyr's stake in Repsol.

"I absolutely rule out that there will be a public intervention or purchase of shares by SEPI or any other body," Zapatero told a news conference.

An association of small shareholders, AEMEC, said on Tuesday that if LUKOIL's bid proceeds, Spanish law could potentially force the Russian company into bidding for 100 percent of Repsol.

While LUKOIL only wants a holding below the 30 percent threshold which would trigger a compulsory bid, the assistance it is getting from savings bank La Caixa, which is considering selling LUKOIL some of its Repsol stake, could mean that technically it exceeds the 30 percent limit, said AEMEC lawyer Angel Fernandez.

This is because La Caixa's cooperation with LUKOIL could mean that any remaining La Caixa share in Repsol would be counted with LUKOIL's as part of a "controlling group" with a total holding of over 30 percent, Fernandez said.

LUKOIL is offering about 28 euros a share, sources have said, almost twice Repsol's market price at 1528 GMT of 15 euros.

A source close to the deal said that talks held between La Caixa and creditor banks had failed to make progress on proposals for Lukoil to assume Sacyr's debt.

On Tuesday, financial daily newspaper Expansion cited sources close to the government as saying French President Nicolas Sarkozy had been contacted with the aim of persuading Total to look at Repsol.

The French group has been reported in the past to be interested in Repsol, although Total's chief executive Christophe de Margerie has said he does not want a Repsol stake.

Rubalcaba said: "Later we will have to see how the operation is carried out and what the voting rights are for the buyer of this stake. Because it's not the same having a 5 percent stake and voting rights and having 20 percent and no voting rights". (Reporting by Raquel Castillo and Carlos Ruano, writing by Sarah Morris, Jason Webb and Martin Roberts; Editing by David Cowell and Erica Billingham)