Lukoil-controlled Italy refinery will keep going despite oil embargo

General view of the ISAB plant, the Lukoil-owned oil refinery in Sicily, which is likely to be affected by the embargo on Russian seaborne oil that goes into effect in December, in Priolo, Italy October 27, 2022. REUTERS/Antonio Parrinello/File Photo

ROME, Dec 2 (Reuters) - An Italian oil refinery controlled by Russia's Lukoil (LKOH.MM) still sees scope to remain operational despite a European Union embargo on Russian oil starting on Dec. 5, the company said, after Rome paved the way to place it in the hands of trustees.

LITASCO SA, the Lukoil division that owns the ISAB refinery in Sicily which refines a fifth of Italy's crude, said it would rely on raw materials stored for the coming months and future deliveries of oil from countries other than Russia.

The Italian government, which is trying to keep the ISAB plant operational and avoid risks to jobs, on Thursday laid out a scheme for the refinery to be placed under trusteeship. A similar move was taken by Germany when in September it took control of a refinery owned by Rosneft (ROSN.MM).

"ISAB is now a profitable business, a technologically advanced facility and a reliable partner for all its customers, suppliers and contractors," the company's statement said, noting that Lukoil had owned the facility since 2008.

In a statement, Prime Minister Giorgia Meloni made clear the trusteeship scheme was aimed at guaranteeing the continuity of the ISAB refinery, which directly employs about 1,000 workers in an economically disadvantaged area.

An Italian government official said on Friday that Rome authorities were still working on trying to unlock bank financing for the refinery, hoping to avoid putting it under trusteeship.

Lukoil is not affected by sanctions in Europe, but banks remain reluctant to deal with a Russia-related entity as they fear being targeted by potential future fines in the United States, where the company has been subject to sectoral sanctions since 2014.

ISAB sees financial needs worth around 700 million dollars, a source close to the matter said, adding the refinery can work at full capacity until the end of December.

The government also wants to avert risks of litigation with Lukoil. Rosneft in October filed a complaint with a top court in Germany against the government for taking control of its unit there.

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Reporting by Angelo Amante and Giuseppe Fonte, editing by Alvise Armellini, Louise Heavens and Jane Merriman

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