HomeMediaLatest NewsWhat will happen to the Lukoil refinery in Bulgaria after the introduction of the ninth package of sanctions?

What will happen to the Lukoil refinery in Bulgaria after the introduction of the ninth package of sanctions?

17 December 2022

Belogoryev Alexey M. Research and Development Director, Director of the Center for Energy strategic analysis and forecasting

Alexey Belogoryev, Deputy Principal Director on Energy Studies of the Institute for Energy and Finance, gave a comment to Business FM about the current problems and prospects of the Bulgarian refinery of LUKOIL.

Lukoil has warned about problems at the largest oil refinery in Bulgaria. The enterprise in Burgas may suffer from a ban for EU countries on the export of the Russian oil refined products.

In November, Sofia announced that the company had agreed to transfer all its processes to Bulgaria and pay many times more to the budget if the company could operate at full capacity. At the same time, Neftohim warned that if the export ban is imposed, the company can be closed. Now the Bulgarian authorities are preparing for a crisis — a bill allowing the temporary transfer of the refinery under state administration is moving through parliament. Is it possible to compare the situation in Burgas with the problems of Lukoil in Sicily, where another of its large refineries may face nationalization?

Alexey Belogoryev argues:

"The situation, on the one hand, is similar, of course, to what is happening in Italy, in Sicily. On the other hand, the approach of the Bulgarian government is different. While there is no talk of nationalization, although in Bulgaria, as in Italy, the political leapfrog continues, so any changes are possible. In addition, Bulgaria has achieved, unlike Italy, permission to continue sea imports of Russian oil until the end of 2024 and tried to obtain permission to supply petroleum products from this refinery to other EU countries, initially it was also about 2024, but at the last moment it was decided that only until March 5, 2023. And here, in fact, the main problem is connected with this, because the refinery is already far from working at full capacity and the volume of the economy is very much tied to exports. The Bulgarian market is relatively small, although it is the main one for this plant. In principle, the problem can be solved if Lukoil could replace Russian oil with some other, but this is economically likely to be extremely unprofitable for it, given the shoulder of transportation. And this already poses threats to the supply of the Bulgarian market."

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