Pumps may run dry in the region until Russian companies find buyers for their refineries in Bulgaria, Romania, and Serbia. Russian oil company Lukoil announced on Monday that it has begun selling all its international assets following the sanctions imposed by the United States.
“Lukoil informs that owing to the introduction of restrictive measures against the company and its subsidiaries by some states, the company announces its intention to sell its international assets. The consideration of bids from potential purchasers has been started. The sale of the assets is conducted under OFAC wind-down licence,” the company said in a statement.
If necessary, Lukoil plans to apply for an extension of the operational licence to ensure the uninterrupted operation of its international assets. The Russian firm added that the evaluation of bids from potential buyers has already begun.
In the Balkans, Lukoil owns two major refineries – in Bulgaria and Romania. The Bulgarian refinery in Burgas is the largest in Southeastern Europe, with an annual processing capacity of over 7 million tonnes of crude oil. Lukoil’s Romanian refinery, Petrotel, has an annual capacity of around 2.4 million tonnes as the Russian-controlled plant employs fewer than 500 workers.
Lukoil also operates an extensive retail network of about 320 petrol stations in Romania and another 226 in Bulgaria. Once the sanctions take full effect in a month’s time, banking services for these stations could be disrupted.
Perfect oil storm
The US sanctions may trigger a perfect energy storm in the region, having already hit Serbia’s NIS refinery – owned by Gazprom – which processes 4.6 million tonnes of crude annually. The shutdown of refineries with a combined processing capacity of 14 million tonnes of crude oil will be extremely difficult to offset. Currently, Lukoil’s refinery in Ploiești is fully shut down for major maintenance, the company announced on its Facebook page. Three days after the shutdown, an explosion occurred, injuring a worker.
Following the explosion and Washington’s sanctions against Lukoil, Romania’s State Secretary for Energy, Cristian Bușoi, suggested that the government might consider purchasing the Petrotel refinery. The facility has been on sale for nearly a decade without attracting investor interest, according to Romanian media reports.
“We would be happy if we no longer had Lukoil,” Bușoi said, as quoted by Politico in an analysis of the tariffs imposed by Donald Trump on the European Union. His statement comes against the backdrop of Lukoil’s repeated failure to sell the facility.
Oil industry sources told HotNews that the refinery requires significant investment, as its equipment is outdated.
Can’t compensate
“At present, there are enough fuels, and I hope there will be after the end of the year as well. The government says there is no need for panic or stockpiling. Fuel prices remain stable,” said Svetoslav Benchev of the Bulgarian Petroleum and Gas Association on bTV.
“Romania is unlikely to have enough supplies to cover Bulgaria’s needs once one of its refineries is shut down. To meet daily demand, more than 350 tankers would need to cross the border continuously – a logistical impossibility,” Benchev warned. He added that Greece is also unlikely to have enough surplus capacity to compensate for a shortfall in Bulgaria.
“If the refinery shuts down, it’s hard to predict how high prices could go, as shortages would spread beyond Bulgaria and across the region,” Benchev said.
The European Commission, however, does not currently see a threat to energy supply security due to the US sanctions against Lukoil and Rosneft, Commission spokesperson Anna-Kaisa Itkonen said on Monday.
“EU law requires all member states to maintain oil reserves for at least 90 days. We are in close contact with them regarding the US decision, as it could indeed have consequences,” she noted.
The Commission urged member states to continue diversifying their energy sources and reaffirmed its readiness to support them if needed.
Lukoil operates refineries in several EU countries, including Bulgaria and Romania. On Monday, Energy Commissioner Dan Jørgensen visited Romania and will travel to Bulgaria on Tuesday.