Italy could nationalise Lukoil refinery, sources say

ISAB, which is Italy's biggest oil refinery by capacity, used to buy 30-40% of its feedstock from Russia, with the rest coming from international markets. But one of the effects of Russia's invasion of Ukraine is that ISAB has been forced to source nearly all of its crude oil from Russian owner Lukoil because international banks are no longer providing it with credit.

Italy is considering temporary nationalisation of Lukoil-owned refinery ISAB as one of its options if sanctions are imposed on Russian oil, two government sources told Reuters. Industry Minister Giancarlo Giorgetti plans to raise the nationalisation of ISAB as an option when the Italian cabinet meets on Thursday, one of the sources said.

With Europe heavily reliant on Russian oil and gas imports, the continent remains divided on the issue of a ban. Ukraine, Poland and Lithuania are among states in favour of a ban on Russian oil and gas imports, while Germany and Hungary are opposed to an immediate embargo. ISAB, which is Italy's biggest oil refinery by capacity, used to buy 30-40% of its feedstock from Russia, with the rest coming from international markets.

But one of the effects of Russia's invasion of Ukraine is that ISAB has been forced to source nearly all of its crude oil from Russian owner Lukoil because international banks are no longer providing it with credit. Lukoil is not currently subject to sanctions.

"Since we don't have credit at the international level we can't buy crude from elsewhere," ISAB Deputy General Manager Claudio Geraci told Reuters. The refinery, which employs about some 1,000 workers, is owned by Swiss-based trading and supply group Litasco SA, which sells 89% of its output.

A representative of Lukoil-controlled Litasco was not immediately available for a comment. ISAB, which accounts for about 22% of overall refining capacity in Italy, is located on the island of Sicily and its closure would hit jobs and growth in the area.

Credit being cut by banks also means companies working for ISAB have to wait longer to be paid, Geraci said. Fiorenzo Amato, a local official at the CGIL trade union, said there was currently no disruption but acknowledged that the plant could run into trouble if Russian oil imports stopped.

Before the COVID-19 pandemic hit Italy's energy demand, ISAB's output was 10.6 million tonnes a year, 13% of the country's total.

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